US becomes 2nd largest source of FDI into India
What's the story
The United States has replaced Mauritius as the second-largest source of foreign direct investment (FDI) into India, according to a report by The Times of India. This change comes as equity inflows from the US more than doubled to over $11 billion in 2025-26. The shift indicates a growing trend among companies to invest directly in India instead of routing funds through tax-friendly jurisdictions.
Trends
Japan also sees significant increase in equity inflows
Singapore has retained its position as the top FDI source, with a steady rise in investments. Meanwhile, Japan has also seen a sharp increase in equity inflows, thanks to large deals in the financial services sector. Commerce and Industry Minister Piyush Goyal recently revealed that American companies have committed investments worth around $60 billion in recent months, highlighting growing US interest in India's market.
Investment conduit
Shift in investment routes
After changes in India's tax treaty with Mauritius, Singapore has become the preferred route for investments into India. It accounted for about one-third of total equity inflows in the last fiscal year. However, tax-efficient jurisdictions are still relevant to global capital flows. Investments from the Cayman Islands surged from $371 million in 2024-25 to $2.1 billion last year, although officials said this spike could be due to a few large investments.
Investment sectors
Changes in sectoral trends for FDI inflows
There has also been a shift in sectoral trends within FDI inflows. Computer hardware and software have emerged as the top recipients of foreign investment, overtaking services. This is partly due to increased investments in data center infrastructure. Food processing has also seen strong growth with equity inflows rising more than five times, while sea transport and shipping-related activities saw an extraordinary surge of nearly 30 times.