FDI vs FPI
Foreign Direct Investment builds or buys a lasting stake in an Indian business; Foreign Portfolio Investment buys Indian stocks and bonds that can be sold and pulled out in minutes.
Explain it like I'm 10
Imagine two different foreigners investing in the same Indian city. One buys a plot of land and builds a factory — they've made a long-term commitment, hired local staff, and can't simply change their mind and leave by tomorrow morning. The other buys shares of an Indian company on the stock exchange from their laptop overseas — they can sell those shares and move the money out just as fast as they put it in. The first is Foreign Direct Investment (FDI); the second is Foreign Portfolio Investment (FPI) — and that difference in "stickiness" is the single most important thing to understand about the two.
The formula
Net FDI = Gross FDI inflows − Repatriation − Outward FDI by Indian firms FY26 (2025-26): Gross FDI = $94.84 billion (a fresh record) Net FDI = $6.95 billion (heavy repatriation & outward investment)
Historical data
Gross FDI hit a record $94.84 billion in FY26 — but Net FDI, after repatriation by existing foreign investors and outward investment by Indian firms, tells a far less triumphant story, having collapsed from nearly $28 billion in FY23 to under $1 billion in FY25 before a partial recovery.
Who calculates it
The Department for Promotion of Industry and Internal Trade (DPIIT) tracks FDI inflows; the RBI compiles the net FDI figures as part of the Balance of Payments; FPI flows are tracked by SEBI and reported through depositories.
Where this number can mislead you
- ⚠Gross FDI headlines can significantly overstate the real net investment story — India's FY26 gross FDI of $94.84 billion coexisted with net FDI of just $6.95 billion once repatriation and outward investment are netted out.
- ⚠FPI can reverse extremely fast — monthly outflows exceeding $10 billion have occurred during global risk-off events — making FPI-heavy capital inflows a much less stable funding source for the current account than FDI.
- ⚠A rising "repatriation" figure isn't inherently bad news; it can simply reflect earlier FDI investments maturing and successfully realising returns, which is a normal and even healthy part of the investment cycle.
- ⚠FDI figures can be inflated by round-tripping — money that originates from Indian investors, is routed offshore through favourable jurisdictions, and returns to India recorded as "foreign" investment, though regulatory changes have narrowed this over time.
Reality check
India recorded its highest-ever gross FDI inflow of $94.84 billion in FY26, but net FDI — the figure that actually matters for financing the current account — came in at just $6.95 billion, because repatriation by existing foreign investors ($53.58 billion) and outward investment by Indian companies ($33.29 billion) consumed almost the entire gross inflow, a gap that illustrates why gross and net FDI can tell almost opposite stories in the same year.
Test yourself
What is the fundamental difference between FDI and FPI?