India attracted gross FDI of $94.53 billion in 2025-26. That appears encouraging for an economy aspiring to become a global manufacturing hub. Yet the headline conceals a less comforting reality. Net FDI — after accounting for outflows — stood at only $7.65 billion, barely 8 per cent of gross inflows. If this were a temporary fluctuation, it would not be especially troubling. But the trend appears structural rather than cyclical.

FDI has long been regarded as the most desirable form of external capital for developing economies. Unlike portfolio flows, which can enter and exit quickly in search of short-term gains, FDI is assumed to reflect long-term confidence. It brings capital, technology, managerial expertise, and access to global markets. That is why net FDI matters more than the headline gross figure. It captures what remains after repatriation, disinvestment, and outward investments are taken into account. On this measure, the picture is sobering.

In 2020-21, India’s net FDI inflows were around $44 billion, equivalent to nearly 54 per cent of gross inflows. Over the next four years, they fell steadily, reaching less than $1 billion in 2024-25. Although there was a modest recovery in 2025-26, it was driven largely by higher gross inflows rather than a........

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