According to the Reserve Bank of India’s (RBI) October bulletin, released on Friday, net FDI inflows reached $3.3 billion in August. The increase was supported by sustained gross FDI inflows and a moderation in the pace of outward foreign direct investment.
RBI data showed that gross FDI inflows increased 20% year-on-year to $11.1 billion during April-August 2026. Meanwhile, net outward FDI rose 26.5% to $17.7 billion, compared with a 41.9% increase a year earlier.
In August, outward FDI flows moderated, with more than half of the investments directed towards Singapore, the Netherlands and the US.
India recorded negative net FDI flows from August to December 2025 before recovering in the final quarter of the previous financial year. However, net FDI flows again slipped into negative territory in May and June of the current financial year as outward investments exceeded inward inflows.
Financial services, communication services, computer services and manufacturing accounted for 73% of total FDI equity inflows during April-August 2026. Singapore, Japan, Mauritius, the United Arab Emirates and the US were the major sources of inward FDI, collectively accounting for around 81% of total inflows.
The recovery in foreign direct investment comes against the backdrop of continued selling by foreign portfolio investors. FPIs withdrew $9.8 billion from Indian equity markets during April-August, highlighting the contrasting trends in portfolio investments and direct investment flows.
The RBI also reported a sharp increase in its net dollar purchases in August. The central bank purchased $43.26 billion on a net basis during the month, more than double the $18.65 billion purchased in July. The increase coincided with significant inflows of non-resident Indian (NRI) deposits into banks.
India received around $136 billion under the RBI’s special dollar swap window, while Foreign Currency Non-Resident (Bank), or FCNR(B), deposits crossed $127 billion in August.
Meanwhile, the RBI flagged concerns over mounting inflationary pressures arising from the West Asia crisis and recurring trade tensions. It also highlighted sovereign bond yields at multi-decade highs and elevated public debt as key concerns.
Despite these risks, the central bank noted that sustained domestic demand and continued strength in the services sector were supporting economic growth. The rise in net FDI inflows, alongside substantial outward investment and persistent FPI selling, highlights the changing dynamics of foreign capital flows into and out of India.
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