India FDI Inflows Near $100bn: Key Drivers in 2026

Strong start to FY26 as FDI momentum builds

India’s foreign direct investment (FDI) numbers are showing faster momentum in FY 2025-26, with gross inflows reaching $18.3 billion by February 2026. This already exceeds the $10.61 billion recorded in FY 2024-25, pointing to an acceleration in the pace of inflows. Net FDI also strengthened sharply, rising to $1.2 billion from $1.959 billion. The data points to a healthier balance between inflows and outflows compared with the earlier period. Officials have also indicated that gross FDI could cross $100 billion for the first time, based on the current pace. Alongside actual inflows, India also saw large announced commitments in 2025 across sectors.

Gross and net FDI: what the latest numbers indicate

The jump in gross FDI is being closely tracked because it comes after a period when net flows faced pressure from outflows. Gross inflows of $18.3 billion by February 2026 suggest FY26 could end materially higher than FY25 if the pace holds. The move in net FDI from $1.959 billion to $1.2 billion is notable because it signals improved net capital addition, not just high headline inflows. Separately, RBI-linked data cited for H1 FY26 shows gross FDI inflows rose 16.1% year-on-year to $10.36 billion. The first half figure is also described as the highest ever for the first half of a financial year. In the comparable period of H1 FY25, provisional inflows were $13.37 billion.

Policy execution: Invest India revamp and faster lead processing

Government initiatives are being positioned as key contributors to the shift in FDI momentum. One important operational change highlighted is the restructuring of the Invest India agency. Faster processing of investment leads has been cited as an on-ground improvement in how large investment proposals move through the system. Free Trade Agreements (FTAs) are also referenced as a driver, especially for long-term commitments tied to market access and supply chain decisions. Alongside these, ongoing efforts to improve ease of doing business continue to be highlighted as supportive for foreign investors. The narrative in the latest updates emphasises a move toward higher-value investments rather than only volume growth.

Europe leads actual investment value

European nations are currently the largest source of actual investment, contributing about 42% of total value. The figure matters because it signals that India’s current inflow cycle is not only dependent on one geography. It also lines up with the broader theme of diversified supply chains and policy-driven investment into manufacturing and services. While the source mix can change quarter to quarter, the 42% share is presented as the current dominant contribution in actual investment value. This becomes relevant for investors tracking sectoral flows and export-linked manufacturing buildouts.

IT and services: a major lift to overall inflows

The IT sector has reportedly seen FDI inflows double, making it an important contributor to the overall rise. In the FY 2024-25 breakdown of equity inflows, services accounted for the largest share at 19% of the total. Computer software and hardware followed at 16%, and trading at 8%. Services FDI surged by 40.77% to $1.35 billion in FY 2024-25, based on the figures cited. These data points underscore how India’s services and digital-facing segments continue to draw global capital alongside manufacturing.

Manufacturing and PLI: building scale in high-value sectors

Manufacturing FDI increased 18% in FY 2024-25, rising from $16.12 billion in FY 2023-24 to $19.04 billion in FY 2024-25. The Production-Linked Incentive (PLI) scheme is described as actively boosting manufacturing capacity and export competitiveness. High-value sectors specifically referenced include electronics and pharmaceuticals. The combination of targeted incentives and policy stability has been framed as part of the reason for higher-value investment interest. The broader strategy also ties to scaling manufacturing capabilities while streamlining foreign investment regulations.

Liberalisation measures: insurance, GST and compliance reforms

Several reforms are cited as strengthening India’s investment environment. These include allowing 100% FDI in the insurance sector and the implementation of GST, both positioned as supportive for investor confidence. In addition, the Union Budget 2025-26 is referenced for raising the insurance sectoral cap from 74% to 100% under the automatic route. Another operational reform cited is the integration of MCA and FEMA portals in 2025 to enable real-time updates for joint ventures, reportedly reducing duplication by 40%. These measures focus on compliance simplification, predictability, and lower administrative friction.

Startup funding tailwinds: angel tax abolition and sector openings

A key change for startups is the abolition of the “angel tax” for all classes of investors, effective for FY 2025-26. This is framed as removing a major hurdle for early-stage funding and foreign participation in startup rounds. The 2024 amendment to the Income Tax Act, 1961 is also mentioned as abolishing angel tax and reducing the income tax rate chargeable on income of a foreign company. The broader context links FDI and intellectual property as drivers supporting over 200,000 recognised startups in India. Sector openings are also highlighted, including space technology norms allowing up to 100% FDI for satellite system manufacturing and 74% for satellite operations without prior government approval. Proposed 2025 policies also mention 100% FDI under the automatic route for green hydrogen production and AI or machine learning enterprises.

Commitments and historical context: how FY26 compares

Announced FDI commitments in 2025 were cited at $135 billion across technology, automobiles, energy, and manufacturing. Historically, total FDI inflows peaked at $14.84 billion in 2021-22, supported by a backdrop of low global interest rates and the China-plus-one realignment. Over eleven financial years from 2014 to 2025, India attracted $148.78 billion in FDI, described as a 143% increase versus $108.38 billion during 2003-2014. For FY 2024-25, multiple reported totals are cited: $10.62 billion as total annual inflows, $11.04 billion as provisional inflows, and $10.61 billion as the prior fiscal year comparator against FY26’s February level. The consistent theme across these figures is that FY25 was among the strongest recent years, and FY26’s early pace is higher.

Key figures at a glance

Why the shift matters for markets and policy watchers

The current pattern suggests India is combining large inflows with policy and compliance changes that aim to improve the net quality of capital. A higher net FDI figure can matter for market sentiment because it implies more durable capital addition after accounting for outflows. Sectorally, the emphasis on IT and services alongside manufacturing indicates that inflows are not concentrated in a single theme. For companies and investors, policy execution factors such as faster lead processing and portal integration are important because they can reduce time-to-setup for projects and joint ventures. The focus on higher-value sectors under PLI, especially electronics and pharmaceuticals, ties FDI more directly to capacity creation and export competitiveness. For startups, the angel tax removal and sector liberalisation points to a more open funding environment, particularly for technology-linked segments.

Conclusion

India’s FY26 FDI trend is being shaped by a mix of higher gross inflows, improved net flows, and targeted reforms spanning taxation, compliance, and sectoral caps. With gross inflows already at $18.3 billion by February 2026 and H1 FY26 inflows at $10.36 billion, attention will remain on whether the full-year figure crosses the $100 billion mark as officials expect. The next data releases on FY26 inflows, along with the on-ground outcomes of Invest India’s restructuring and sector-specific policy rollouts, will be key markers to watch.