Are Family Offices the New Guardians of Swadeshi Capital?

Not long ago, global fund managers were writing breathless paeans to India. The fastest-growing major economy. The strongest China+1 candidate. A trillion-dollar consumption story. As a result, India’s capital markets boomed. And everyone—from the quants of Wall Street to Gen Zs in the country’s hinterland—cashed in and out.

Then the music stopped. In the first six months of this year, foreign portfolio investors pulled out ₹2.87trn from Indian equities, far more than the entire previous year. India’s net foreign direct investment (FDI) has plunged. Sovereign-wealth funds, who are known for betting long term, are pulling back from India.

What went wrong? There are diagnoses galore—from elevated valuations of Indian stocks to a resurgent dollar. Perhaps, the strongest of them is India’s lack of an artificial-intelligence (AI) story. Today, smart money is chasing AI labs in the US, semiconductor supply chains in Taiwan and South Korea, and advanced manufacturing across Southeast Asia.

Now, capital is not just seeking quick returns. It is following a strategy. Earlier, the game was to make your country attractive enough for foreign companies to come and sell here. The new game is to get the AI factories—chip fabs and data centres—built on your soil. The allure of access to a large local market is passé. Increasingly, the formula to house critical technology infrastructure of the future is about laying out a red carpet for strategic capex.

The US in 2023 announced a $52bn plan to rebuild its semiconductor supply chain. The European Union is also in the same ballpark. China has been doing this for decades. By the mid-2000s, it was pulling in more than $100bn of FDI annually, which peaked at $344bn in 2021. Whereas India's highest ever score is $64bn in 2020.

As foreign money becomes more selective and more mobile, a question is becoming harder for India to ignore: where will the patient capital for the next phase of growth come from?

Family offices, the subject of our 20th anniversary cover story, could be one of the sources.

India’s wealthy—royalty of yesteryears, legacy business families, unicorn founders, multi-bagger hunters, Bollywood stars and champion sportspersons—are setting up family offices to preserve and enlarge their pots of gold.

In this issue, we highlight the opportunities they are seeking, the passion projects they want to fund and the legacy they want to leave behind through their family offices. These are institutions that could provide the patient domestic capital India needs. But the country can’t take this capital pool for granted.

Many are already running an arm out of Singapore or Dubai instead, where regulatory and taxation structures are simpler. It’s no surprise then that each year, several thousand wealthy Indians choose to shift their domicile elsewhere—the figure was 4,300 in 2024 and 3,500 in 2025.

More than a century ago, Dadabhai Naoroji argued that India was being impoverished because its wealth flowed out to Britain rather than being reinvested at home. The circumstances are vastly different today. Indian wealth is no longer systematically extracted to be sent away. But it is free to move wherever returns are strongest. The challenge for policymakers is to ensure that enough of it continues to stay back and build India.