Obviously, the link you provided and the AI's response are the same in attributing investment outflows as the cause of the net decline. The only difference is that the AI performed calculations and pointed out that among the outflows, outbound foreign direct investment by foreigners is the dominant component, whereas the link you posted did not distinguish between the proportion of India's outward investment and the proportion of foreign direct investment outflows within the total outflows.
Net FDI is calculated after adjusting gross FDI for investments that are repatriated by foreign companies and overseas investments made by Indian companies. Despite record gross FDI inflows, the net figure has been low in the past two years due to foreign investors taking back money they had previously invested in India. This repatriation can be in the form of profits, dividend, or sale of assets. Meanwhile, Indian companies have also invested more abroad.
1. The mathematical relationship behind India's declining net FDI
Assume India has:
- Gross FDI inflows (foreign capital inflows): US$95 billion
- Net FDI inflows: US$7.7 billion
Then:
FDI outflows ≈ 95 − 7.7 = US$87.3 billion
That is, there are outflows of approximately US$87 billion.
2. But Indian companies' overseas investment is only about US$20 billion
Overseas direct investment data from the Reserve Bank of India (RBI) typically shows:
Indian companies' outward FDI is approximately:
- Generally in the range of US$10–20 billion;
- Even in higher years, it is far below US$80 billion.
Therefore:
If total outflows are close to US$87 billion, while Indian companies' overseas investment is only about US$20 billion, then the vast majority of the remaining outflows cannot come from Indian companies' overseas investment.
It is more likely to come from:
① Divestment by foreign investors
For example:
- Foreign funds selling shares of Indian companies;
- Foreign enterprises exiting some investments;
- Equity transfers.
② Repatriation of profits by foreign enterprises
For example:
- Multinational corporations repatriating profits earned in India back to their parent companies.
③ Other capital adjustments in FDI statistics
Including:
- Intra-company fund flows;
- Changes in debt instruments;
- Equity transactions.
indianexpress.com
