Morgan Stanley data showed India’s net foreign direct investment flows fell to near record lows at 0.5 billion dollars over the past year. The figure raises concerns about investor confidence in an economy that has traditionally relied on FDI for manufacturing and infrastructure development.
Net FDI accounts for inflows minus repatriations and disinvestments by foreign companies operating in India. The near-flat reading suggests that new investments barely exceeded capital exiting the country through profit transfers and asset sales.
Analysts linked the weakness to global uncertainty, regulatory friction, and competition from other emerging markets offering manufacturing incentives. Slower FDI complicates India’s ambition to expand factory employment and reduce import dependence in key sectors.
The data point contrasts with India’s large foreign exchange reserves, indicating that portfolio and debt flows have partially offset direct investment weakness. Policymakers face pressure to improve the investment climate as net FDI stagnates despite high-profile production-linked incentive schemes.
Gross FDI inflows into India remain positive, but repatriation of profits by multinational subsidiaries and divestitures have offset new project announcements. Production-linked incentive schemes target electronics, pharmaceuticals, and solar manufacturing to attract fresh greenfield investment.
India’s services sector continues to attract foreign investment even as manufacturing FDI has slowed in recent quarters.
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Sources:
https://www.cnbc.com/2026/05/05/modi-wins-in-west-bengal-for-the-first-time.html