What’s Driving the Surge in Foreign Direct Investment in India by 2026?

FDI Growth Projections for India

New Delhi: Projections indicate that foreign direct investment (FDI) in India is set to experience significant growth by 2026, bolstered by strong economic fundamentals, major investment announcements, ongoing improvements in the business environment, and new investment-related trade agreements.

To maintain India's status as a prime destination for investors, the government continuously evaluates and updates its FDI policies, engaging in extensive discussions with various stakeholders.

This year, the Department for Promotion of Industry and Internal Trade (DPIIT) has conducted numerous meetings to explore strategies for enhancing FDI. In November, Commerce and Industry Minister Piyush Goyal also engaged in talks aimed at streamlining processes to attract more investments.

Key factors such as investor-friendly regulations, attractive returns, a skilled workforce, reduced compliance burdens, decriminalization of minor industry offenses, and simplified approval processes are keeping foreign investors interested in India, even amidst global challenges.

In the fiscal year 2024-25, total FDI exceeded USD 80.5 billion, despite global uncertainties. From January to October 2025, gross overseas investments surpassed USD 60 billion.

DPIIT Secretary Amardeep Singh Bhatia noted that India has seen remarkable investment inflows over the past eleven years, thanks to various government initiatives.

He stated, "We reached an unprecedented high of USD 80.62 billion in 2024-25. We are optimistic that FDI will surpass last year's figure of USD 80.62 billion in 2026."

India is also leveraging its free trade agreement with the European Free Trade Association (EFTA), which has pledged to invest USD 100 billion in FDI over the next 15 years.

This agreement took effect on October 1, 2025, coinciding with Roche Pharma's announcement of a commitment to invest 1.5 billion Swiss francs (approximately Rs 17,000 crore) in India over the next five years.

This investment will be classified as pure FDI, distinct from foreign institutional or portfolio investments from EFTA nations, which include Switzerland, Norway, Iceland, and Liechtenstein.

New Zealand has also committed USD 20 billion under its trade agreement with India, set to be implemented in 2026.

Reports indicate a favorable outlook for FDI in India. According to UNCTAD's World Investment Report 2025, global FDI flows dropped by 11 percent in 2024 to USD 1.5 trillion, but this figure masks significant variations across different economies.

While developed nations saw a 22 percent decline, developing economies, particularly in Asia, including India, maintained robust project activity.

Several major global corporations have announced substantial investments this year.

Microsoft's CEO Satya Nadella revealed plans for a USD 17.5 billion investment by 2030 to enhance infrastructure and capabilities for India's AI-driven future.

Amazon intends to invest USD 35 billion in India over the next five years, expanding its operations from quick commerce to cloud computing and AI. Google plans to invest USD 15 billion over the next five years to establish an AI hub in India.

Apple is also increasing its footprint in India, while South Korean giant Samsung is expanding its manufacturing capabilities in the country.

Arcelormittal Nippon Steel India aims to boost its color-coated steel production capacity to 1 million tonnes annually by 2026, up from the current 700,000 tonnes.

According to the National Statistical Office (NSO), the Indian economy grew by 8.2 percent in the second quarter of 2025-26. The government has introduced the second edition of the Jan Viswas bill to enhance the ease of doing business by decriminalizing minor industry-related offenses.

Experts believe that India's strong economic fundamentals and resilience, coupled with ongoing reforms, will significantly contribute to a resurgence in FDI in 2026.

Rumki Majumdar, an economist at Deloitte India, stated, "As India diversifies its economic ties amid geopolitical uncertainties and advances in manufacturing and services, these factors are expected to attract more long-term FDI into sectors like services, software, and electronics."

Rudra Kumar Pandey, a partner at Shardul Amarchand Mangaldas & Co, noted that FDI from Gulf Cooperation Council (GCC) countries has become a strategic and increasingly stable component of India's foreign investment landscape.

"Technology-driven services are likely to remain the primary draw for foreign capital, with a growing focus on AI, data analytics, cloud infrastructure, and Global Capability Centres dedicated to AI deployment and applied research," he added.

The leading investors in India include Mauritius and Singapore, which together account for approximately 49 percent, followed by the US (10 percent), the Netherlands (7.2 percent), Japan (6 percent), and the UK (5 percent).

The sectors attracting the most FDI in India include services, computer software and hardware, telecommunications, trading, construction development, automobiles, chemicals, and pharmaceuticals.

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

Currently, FDI is prohibited in certain sectors, including lotteries, gambling, chit funds, nidhi companies, real estate, and the manufacturing of tobacco products.

FDI is crucial for India as it will require substantial investments in the coming years to enhance its infrastructure and stimulate growth. Healthy foreign inflows also support the balance of payments and stabilize the value of the rupee.