India's net FDI inflows likely to reach $15 bn in FY27
India's net Foreign Direct Investment (FDI) inflows are projected to rebound to around $15 billion in FY27, according to a ratings agency report
Net FDI had fallen to $6.9 billion in FY26, well below the FY16–FY20 five-year average of $35.1 billion
The projected rebound is attributed to healthy gross FDI inflows and a moderation in the growth rate of repatriation outflows
Growth in repatriation outflows slowed from 51.6% in FY24 to 15.8% in FY25 and around 5% in FY26
A revised, threshold-based FDI framework for investment from land-bordering countries, along with expansion of the Fully Accessible Route (FAR) bond universe and tax exemptions for FPIs in government securities, is expected to support inflows
Outbound FDI from India is also projected to remain healthy through FY27
Net FDI vs Gross FDI
Net FDI is gross FDI inflows minus repatriation/disinvestment by foreign investors and outbound FDI by Indian entities. It is the metric that actually reflects capital available to finance the current account deficit, unlike gross FDI which only measures fresh inflows.
Key Details
- Reported in the Reserve Bank of India's Balance of Payments (BoP) statistics, released quarterly
- Net FDI = Gross inflows − Repatriation/disinvestment − Outbound FDI by Indian companies
- A widening gap between gross and net FDI (as seen in FY24–FY26) signals rising repatriation, which can reflect investor exits or profit-booking rather than a change in gross investor appetite
- Net FDI, along with FPI and external commercial borrowings, forms the capital account, which finances India's current account deficit (CAD)
The projected FY27 rebound is explicitly a "net" FDI story — gross inflows are described as healthy, but the swing is being driven by moderating repatriation outflows, illustrating why the net vs gross distinction matters for capital account analysis.
FDI Policy for Land-Bordering Countries — Press Note 3 (2020) to Press Note 2 (2026)
Press Note 3 of 2020 (DPIIT, under the Foreign Exchange Management Act framework) mandated that any investment from an entity based in, or with a beneficial owner based in, a country sharing a land border with India could only proceed via the government approval route (blanket restriction, no automatic route). In 2026, the Union Cabinet approved a revised framework — Press Note 2 (2026 Series) — replacing this blanket restriction with a threshold-based approach.
Key Details
- Press Note 3 (2020): introduced during the COVID-19 period, applied government-route scrutiny to all such investment regardless of size, aimed at preventing opportunistic takeovers
- Press Note 2 (2026): permits automatic-route investment where a land-border-country investor holds up to 10% beneficial ownership without exercising control; larger or controlling stakes still require government approval
- Administered by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, under India's FDI Policy framework and FEMA (Non-Debt Instruments) Rules, 2019
- Distinguishes the "automatic route" (no prior government approval) from the "government route" (approval required) — the two broad channels for FDI into India
The report cites this liberalized, threshold-based FDI framework as one of the policy measures expected to support the FY27 net FDI rebound, since it narrows the scope of mandatory government-route scrutiny that had been seen as a drag on investment from certain source countries.
Balance of Payments and the Capital Account
The Balance of Payments (BoP) records all economic transactions between residents of India and the rest of the world, split into the Current Account (trade, services, income, transfers) and the Capital/Financial Account (FDI, FPI, loans, banking capital). Net FDI is a Financial Account item.
Key Details
- Compiled and released by the RBI, with underlying trade data from the Ministry of Commerce
- Capital account items — FDI, FPI, External Commercial Borrowings (ECBs), NRI deposits — finance any current account deficit
- FDI is considered more stable ("sticky") capital compared to FPI, which is more volatile and prone to sudden reversals
- India follows the IMF's Balance of Payments and International Investment Position Manual (BPM6) framework for compilation
A sustained rebound in net FDI (a stable financing source) strengthens India's capital account position and reduces reliance on more volatile portfolio flows to finance the current account deficit.
- Projected net FDI for FY27: approximately $15 billion
- Net FDI in FY26: $6.9 billion
- FY16–FY20 average net FDI: $35.1 billion
- Growth in repatriation outflows: 51.6% (FY24) → 15.8% (FY25) → ~5% (FY26)
- Press Note 3 (2020 Series) issued: April 17, 2020
- Press Note 2 (2026 Series): permits automatic-route investment up to 10% beneficial ownership from land-bordering countries without control
- Nodal body for FDI policy: DPIIT, Ministry of Commerce and Industry