Will India continue to remain an attractive FDI destination in 2026?

FDI inflows into India are expected to register robust growth in 2026, supported by strong macroeconomic fundamentals, big-ticket investment announcements, sustained efforts to improve the ease of doing business, and a new generation of investment-linked trade pacts.

Illustration: Dominic Xavier/Rediff

To ensure that India remains an attractive and investor-friendly destination, the government reviews the FDI (Foreign Direct Investment) policy on an ongoing basis and makes changes from time to time after holding extensive consultations with stakeholders.

The Department for Promotion of Industry and Internal Trade (DPIIT) has this year held a series of meetings with stakeholders on ways to promote FDI.

In November, Commerce and Industry Minister Piyush Goyal also held consultations on ways to attract greater investments by making processes faster, smoother, and more efficient.

Investor-friendly policies and regulatory practices, strong return on investments, a talented workforce, easing compliance burdens, decriminalising minor industry-related offences, and streamlined approvals are key measures that are keeping foreign investors focused on India despite global challenges.

In 2024-25, total foreign direct investments (FDI) have crossed $80.5 billion amid global uncertainties. Gross overseas investments during January-October 2025 have crossed $60 billion.

DPIIT secretary Amardeep Singh Bhatia said India has attracted remarkable investments in the last eleven years due to a series of measures taken by the government.

“It has touched an all-time high of $80.62 billion in 2024-25.

“We are hopeful that this year (2026), FDI may cross the last year’s data of $80.62 billion,” he told PTI.

India is also banking on its free trade agreement with the four-nation European Free Trade Association (EFTA), under which the bloc has committed to invest $100 billion in foreign direct investment into the country over 15 years.

The pact came into force on October 1, 2025, and on the very day of its implementation, Swiss healthcare major Roche Pharma announced a commitment to invest 1.5 billion Swiss francs (about Rs 17,000 crore) in India over the next five years.

This will be pure FDI and not foreign institutional or portfolio investments by sovereign wealth funds of the EFTA nations – Switzerland, Norway, Iceland, and Liechtenstein.

A similar commitment of $20 billion has been made by New Zealand under its trade pact with India, which is slated to be implemented in 2026.

Certain reports have also projected a positive outlook for foreign direct investment into India.

According to UNCTAD’s World Investment Report 2025, global FDI flows fell by 11 per cent in 2024 to $1.5 trillion.

However, this figure conceals wide differences in performance across economies.

Developed countries experienced a 22 per cent contraction, while flows to developing economies were stable.

In Asia, particularly, east and southeast Asia, as well as India, investors maintained strong project activity, the report has said.

Some of the major global firms have announced big-ticket investments this year.

Microsoft CEO Satya Nadella has announced an investment of $17.5 billion by 2030 to help build infrastructure and sovereign capabilities for the country’s AI-first future.

Amazon plans to invest $35 billion in India over the next five years to expand its businesses from quick commerce to cloud computing and artificial intelligence.

Google will invest $15 billion over the next five years to set up an AI hub in India.

iPhone maker Apple is expanding its presence in India, and South Korean electronics major Samsung is also expanding its manufacturing portfolio in the country.

Arcelormittal Nippon Steel India is aiming to increase the colour-coated steel capacity to 10 lakh tonnes per year by 2026 from the present 7 lakh tonnes.

As per the National Statistical Office (NSO), the Indian economy grew 8.2 per cent in the second quarter of 2025-26.

The government, on its part, has come out with the second edition of the Jan Viswas bill to promote ease of doing business by decriminalising minor industry-related offences.

Experts, too, have stated that India’s strong economic fundamentals and resilience, along with a sustained reform push, will be a big reason for a revival of FDI in 2026.

“As India diversifies its economic relationships amid geopolitical uncertainties and moves up the value chain in manufacturing and services, these developments are expected to channel greater long-term FDI into services, software and electronics,” Rumki Majumdar, Economist, Deloitte India, said.

Rudra Kumar Pandey, Partner, Shardul Amarchand Mangaldas & Co, said FDI from the Gulf Cooperation Council (GCC) countries has emerged as a strategic and increasingly durable pillar of India’s foreign investment landscape.

“Technology-led services are expected to remain the primary magnet for foreign capital, with increasing emphasis on artificial intelligence, data analytics, cloud infrastructure, and Global Capability Centres focused on AI deployment and applied research,” he added.

The top investors in India include Mauritius and Singapore (together accounting for about 49 per cent), followed by the US (10 per cent), the Netherlands (7.2 per cent), Japan (6 per cent) and the UK (5 per cent).

The key sectors which attracted the maximum FDI in India include the services segment, computer software and hardware, telecommunications, trading, construction development, automobile, chemicals and pharmaceuticals.

FDI is allowed through the automatic route in most of the sectors, while in areas such as telecom, media, pharmaceuticals and insurance, the government approval is required for foreign investors.

At present, FDI is prohibited in certain sectors.

They are lottery, gambling and betting, chit funds, nidhi company, real estate business, and manufacturing of cigars, cheroots, cigarillos and cigarettes using tobacco.

FDI is important as India would require huge investments in the coming years for its infrastructure sector to boost growth.

Healthy foreign inflows also help in maintaining the balance of payments and the value of the rupee.