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India's net FDI inflows will likely rebound in FY27 reaching USD 15 billion, supported by healthy gross inflows and moderation in growth of repatriation outflows amid policy measures, as per a report by CareEdge Ratings.
The report noted, India's capital account closed FY26 on a weak note, with the surplus narrowing sharply to USD 1.9 billion from USD 16.6 billion in FY25 and USD 89.5 billion in FY24. Also, net FDI remained subdued at USD 6.9 billion in FY26 -- well below the five-year FY16-FY20 average of USD 35.1 billion. On the other hand, FPI outflows of USD 16.6 billion, driven by geopolitical uncertainty, added further pressure. "However, early signs suggest these trends may be shifting, with a gradual moderation in the momentum of repatriation outflows," it noted. According to the report, growth in repatriation outflows moderated steadily, from 51.6 per cent in FY24 to 15.8 per cent in FY25 and 5 per cent in FY26. Additionally, repatriation has declined by 8.7 per cent in April FY27. "While monthly data may fluctuate, we believe growth in repatriation outflows has likely peaked, as the strong post-pandemic phase of profit booking and PE/VC exits appears to be fading," it said. Additionall, in Q1 FY27, 9 IPOs raised Rs 37.9 billion, as against 15 IPOs raising Rs 297 billion in the same quarter last year. Noting the steady progress in gross FDI inflows, CareEdge estimates, "net inflows will improve in FY27 compared with the previous fiscal year." It further noted, the government replaced the blanket restrictions on FDI from land-bordering countries introduced in 2020 with a more nuanced, threshold-based framework. This enables targeted foreign acquisitions and joint ventures, particularly to support manufacturing. "The move could help India attract a larger share of FDI from China, whose outbound investment has grown sharply over the past decade and now accounts for around 11 per cent of global FDI flows," it said. It noted that outbound FDI from India rose 20.1 per cent year-on-year in FY26, with annual outflows increasing from an average of USD 9.4 billion in FY17-19 to USD 26.2 billion in FY24-26. In April FY27, outbound FDI rose 42 per cent YoY to USD 4.8 billion, and is expected to remain healthy through FY27. Additionally, the expansion of the FAR bond universe, tax exemptions for FIIs/FPIs investing in government securities, and higher investment limits for NRIs and OCIs are expected to support FPI inflows, particularly into the debt market. "Overall, supported by healthy growth in gross inflows and an expected moderation in growth of repatriation outflows, we project net FDI to rise from USD 7 billion in FY26 to USD 15 billion in FY27," it said. (ANI)
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