FPIs Pump in $3.1 Billion as RBI's Deposit Move Sparks $17.4 Billion FCNR(B) Surge

A rebound in overseas funding points to renewed trust in India's economic prospects, as the nation continues to be one of the quickest-expanding major markets worldwide.

The country sustained momentum in economic activity through June, supported by resilient industrial and services sectors, according to the latest State of the Economy report under the Reserve Bank of India’s (RBI’s) July bulletin.

Reserve Bank of India (RBI) staffers, under the guidance of Deputy Governor Poonam Gupta, authored the State of the Economy report in the central bank's July bulletin.

The central bank stated that the views expressed in the report are those of the authors and do not represent its official position.

While an uneven southwest monsoon has affected the farm sector, the report stated the impact on food inflation could be "mitigated by comfortable foodgrain stocks".

FDI Inflows Rise

Net foreign direct investment (FDI) between April and May of FY27 increased significantly to $6.5bn, up from $2.47bn during the same timeframe the previous year, supported by robust inflows in April.

Net FDI climbed to $6.58bn in April 2026, driven by strong equity inflows and lower repatriation by foreign investors.

It then slipped to a marginal net outflow of $74mn in May after remaining positive for the previous four months, as gross FDI inflows more than halved to $6bn from over $15bn in April, while repatriation by foreign investors remained broadly unchanged.

"During April-May 2026, FDI remained higher in both gross and net terms, supported by lower repatriation.

Japan, Singapore and Mauritius accounted for around 74 per cent of total equity inflows. Financial services attracted the highest share of equity inflows, followed by manufacturing, wholesale and retail trade, and computer services.

Together, these sectors accounted for around 80 per cent of total inflows," the report stated.

Outward FDI during the period was also highly concentrated. Around 74 per cent of this investment was directed to the US, the Cayman Islands and the Netherlands.

Financial, insurance, business services and manufacturing accounted for over 85 per cent of outward FDI.

FPI Deposit Growth

Foreign portfolio investors (FPIs) recorded net inflows in June 2026, supported by policy measures for the debt market and easing geopolitical tensions. FPIs invested $3.1bn across equity and debt segments until July 20.

Concessional swap measures introduced by the RBI in June triggered a surge in foreign currency non-resident (bank), or FCNR(B), deposits. These deposits rose by $17.4bn between June 8 and July 17, 2026.

"The momentum of external trade sustained as reflected in high growth in exports and imports in Q1:2026-27.

This is likely to be strengthened by the recent operationalisation of the India-UK Comprehensive Economic and Trade Agreement and progress in other bilateral trade agreements," the report stated.

India's external sector remains stable with an improving outlook, supported by continued foreign investment inflows, maintaining comfortable foreign exchange reserves.

Key external vulnerability indicators remained well-anchored as of end-March 2026. On the domestic economy, the report said India had navigated external uncertainties well, underpinned by healthy demand conditions.