India Faces FDI Outflow: What It Means
In October 2023, India experienced a net outflow of Foreign Direct Investment (FDI) amounting to $1.55 billion, according to the Reserve Bank of India (RBI). This follows a similar trend from September, where there was a net outflow of $1.66 billion. This trend raises concerns about foreign investors withdrawing their investments from the Indian market.
On a gross basis, the FDI inflow for October was recorded at $6.54 billion, slightly lower than the $7 billion observed in September and $7.17 billion in October 2024. However, the first seven months of the fiscal year 2025-26 have seen a net FDI inflow of $6.20 billion, indicating a mixed scenario for foreign investments.
The recent net outflow is largely attributed to foreign investors repatriating their funds while Indian companies are increasing their investments overseas. Together, these transactions exceeded $8 billion for two consecutive months, marking a significant trend in Indian firms looking abroad for growth opportunities.
The RBI reported that key destinations for Indian outward FDI included Singapore, the United States, and the UAE, which accounted for over half of the total outward investments. Notably, around 90 percent of these investments were directed towards financial services, insurance, and business services, along with wholesale and retail trade.
In October alone, Indian companies invested approximately $3.09 billion abroad, while foreign investors repatriated nearly $5 billion. Although this combined figure of $8.08 billion is lower than September's $8.67 billion, it is still 11 percent higher than the previous year, reflecting a growing trend in overseas investments.
The outflow of FDI and the rising overseas investments have contributed to pressure on the Indian rupee, which has fallen to record lows against the US dollar. The rupee recently breached the 90 and 91 per dollar marks, prompting the RBI to intervene and stabilize the currency, which closed at 89.65 per dollar on Monday.
This decline in FDI inflows has caught the attention of the Indian government. Chief Economic Advisor V Anantha Nageswaran highlighted that rising interest rates in developed countries and a push for localized supply chains have altered the FDI landscape. To compete effectively, India must attract global supply chain companies and enhance its appeal for FDI.
Furthermore, foreign investors have withdrawn a net amount of $17.73 billion from Indian equity markets in 2025, underscoring the need for India to ramp up its efforts to attract foreign investments. Nageswaran emphasized that without increased FDI, it will be challenging for India to boost exports and improve its economic standing.
