Page 33 - Policy Economic Report- June'26

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

10. Foreign Direct investment continues to strengthen investor confidence

India continued to witness robust Foreign Direct Investment (FDI) inflows during FY 2025–26,
underscoring sustained investor confidence in the country's macroeconomic fundamentals, expanding
manufacturing base, and ongoing structural reforms. According to data released by the Department for
Promotion of Industry and Internal Trade (DPIIT), FDI equity inflows increased by 18 % to US$58.84
billion during FY 2025–26, supported by strong investments in manufacturing, digital services, financial
activities, and infrastructure. The increase reflects the positive impact of policy reforms, improved ease
of doing business, production-linked incentive (PLI) schemes, and continued expansion of India's domestic
market.

The computer software and hardware sector remained the largest recipient of foreign investment,
followed by services, trading, telecommunications, automobile, pharmaceuticals, chemicals, and
construction-related activities. Manufacturing continued to attract a growing share of FDI, reflecting
India's emergence as an important global production and supply-chain destination. Government
initiatives such as Make in India, expanding digital infrastructure, semiconductor manufacturing,
electronics production, renewable energy, and logistics development have further strengthened India's
attractiveness as an investment destination.

Among source countries, Singapore remained the largest investor, while FDI inflows from the United
States more than doubled during FY 2025–26 to over US$11 billion, reflecting deepening economic ties
and growing investor confidence. Mauritius, Japan, the United Arab Emirates, and the Netherlands also
remained important sources of investment. At the state level, Maharashtra, Karnataka, Tamil Nadu, Delhi,
and Haryana continued to account for a significant share of total FDI inflows owing to their well-developed
industrial ecosystems, infrastructure, and skilled workforce.

Looking ahead, India's investment outlook remains favorable, supported by strong domestic demand,
continued public infrastructure investment, manufacturing expansion, digitalization, and ongoing policy
reforms. The recent conclusion of free trade agreements, implementation of labor and logistics reforms,
and continued emphasis on high-technology manufacturing are expected to further enhance India's
competitiveness as a preferred global investment destination. Nevertheless, geopolitical uncertainty,
slower global growth, and tighter international financial conditions remain important external risks that
could influence the pace of future investment flows.

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