Mumbai: Foreign investment in India is not keeping pace with the country’s strong economic growth, even as it remains one of the fastest growing major economies in the world. A report by the Amundi Investment Institute says global investors still allocate less money to India than its economic potential suggests.
According to the report, foreign investors sold large volumes of Indian equities between 2025 and early 2026, pushing allocations close to decade lows. Global funds have shifted toward artificial intelligence driven investments and safer markets amid trade tensions and geopolitical uncertainty.
Despite the slowdown in foreign inflows, India continues to show strong long term appeal. The country’s growth is supported by robust domestic consumption, a young workforce and improving fiscal discipline. Analysts also note that relative currency stability and policy reforms are strengthening confidence among long term investors.
India’s upcoming inclusion in major global bond indices is expected to attract significant foreign capital into debt markets. This move could broaden investor participation and deepen the country’s financial markets.
Global factors have played a key role in limiting foreign inflows. The surge in artificial intelligence investments has diverted funds toward technology heavy markets, while global trade tensions and geopolitical risks have made investors more cautious about emerging markets. Concerns about high stock valuations and uneven corporate earnings have also influenced investor decisions.
Even so, sentiment may improve in the coming months. India’s expanding trade ties with major economies, including the United States and European partners, are expected to support foreign direct investment and improve market confidence. Portfolio diversification needs and rising geopolitical risks could also encourage investors to increase exposure to emerging markets.
India’s economy is projected to grow between 6.8 percent and 7.2 percent, maintaining its position as the fastest growing major economy. Domestic investors have continued to support the stock market despite foreign outflows, helping maintain market stability.
Analysts say India’s structural strengths remain intact, and foreign investment flows may strengthen over time as global conditions stabilize and investors reassess long term opportunities in the country.