India's overseas direct investment (ODI) declined by almost 50 per cent in August to $1 billion compared to the previous month as well as in the corresponding month last year, according to finance ministry data.
Experts have said the dip in August could be due to the uncertainty in the global economic scenario after the US tariffs.
The actual ODI outflows during April-August FY26 grew by 29 per cent compared to the same period last year to $10.2 billion, according to the data.
"With uncertainties in the global environment and the US tariffs coming into effect, companies are preferring to reduce risk by investing in the country itself," said Madan Sabnavis, chief economist, Bank of India.
India is facing a 50 per cent tariff from the US, which has threatened labour intensive sectors such as textile and footwear.
In the initial period of FY26, the ODI outflows had increased, especially in April when the amount had tripled compared to previous year to $2.76 billion, signifying expanding global presence of Indian companies.
"The overseas investments may be tapering down now after a significant increase in the beginning of FY26. Indian companies want to become global MNCs and expand abroad. After frontloading this investment, things are flattening now," Madhavi Arora, economist, Emkay Global said.
Singapore was the top destination for ODI with $3.1 billion outflows in the April-August FY26 period, followed by the US at $1.8 billion and Mauritius at $1.3 billion.
Financial, insurance and business services are the sectors which have attracted the maximum ODI from India with the amount reaching $4.3 billion in April-August period of FY26. This was followed by transport, storage and communication services drawing ODI of $1.8 billion and manufacturing at $1.4 billion in the first five months of FY26.Indian firms, experts say, are turning to GIFT City as a strategic gateway for outbound investments while offering regulatory clarity and tax advantages.
-- Ruchika Chitravanshi, Business Standard
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