India’s June quarter saw the highest foreign direct investment in 15 years, yet a significant proportion of this money is being repatriated or invested abroad, raising questions about the sustainability of the country’s FDI boom.
India’s foreign investment story in the June quarter was one of strength, but also of leakage. Gross foreign direct investment reached $30.66 billion in the first quarter of 2026-27, the highest level in 15 years, according to Business Standard’s report on Reserve Bank of India data. Yet a large share of that money did not stay put: foreign investors took out about 44 per cent through repatriation, while Indian firms sent another sizeable portion overseas through outward investment.
Even after those outflows, net FDI climbed to $7.84 billion, the strongest reading in five years. That was still only about a quarter of gross inflows, underscoring how much of the headline figure is offset before it can support domestic investment. Business Standard noted that net FDI rose 50 per cent from a year earlier, but the longer-term picture is less reassuring. Over the past 16 quarters, net FDI has averaged just 12 per cent of gross inflows, sharply below the 54 per cent average recorded across the prior 44 quarters.
The shift is most visible in repatriation, which includes dividends, royalties and equity sales. According to Business Standard, the share of gross FDI absorbed by repatriation has risen markedly in recent quarters, reflecting a market in which investors are increasingly willing to enter and exit with ease. RBI governor Sanjay Malhotra has described that trend as evidence of a “mature market”, but economists quoted by the paper warned that a faster pace of exits can also signal discomfort with the investment climate and weaker prospects for long-term commitment.
Outward investment by Indian companies is adding to the pressure on net inflows. Business Standard said Indian firms have stepped up overseas acquisitions and investments in recent years, with companies ranging from drugmakers and technology groups to telecom and metals businesses cited as active buyers abroad. Former chief statistician Pronab Sen said that was troubling, arguing that large corporate profits are not translating into enough reinvestment at home. His view was that some Indian companies now see better opportunities outside the country than within it.
The composition of foreign money is also changing. Equity inflows reached a six-year high of about $20 billion in the quarter, and Japan overtook Singapore as the biggest source of such investment, helped by major deals in India’s financial sector. Business Standard reported that MUFG Bank bought a 20 per cent stake in Shriram Finance in April, while Sumitomo Mitsui Banking Corporation became the largest shareholder in Yes Bank and Mizuho Financial Group agreed to take control of Avendus Capital. India Briefing and other market trackers said Singapore remained a leading source overall, but services continued to dominate sectoral inflows, especially banking, insurance and software.
That matters because the durability of India’s FDI boom will depend not just on record gross inflows, but on how much stays in the economy after exits and outward investment are accounted for. RBI deputy governor Poonam Gupta has said gross FDI could cross $100 billion in FY27, which would be another record. But as Business Standard noted, net FDI will improve only if repatriation and outward investment grow more slowly than incoming funds. For now, the headline is impressive; the underlying retention rate remains the more important test.
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