New Delhi: The United States has climbed to the second-largest source of foreign direct investment (FDI) into India during the fiscal year 2025-26, surpassing Mauritius for the first time, according to official data. Equity inflows from American companies more than doubled year-on-year to exceed $11 billion, as firms increasingly chose to invest directly into India rather than route funds through traditional tax-friendly jurisdictions such as Mauritius. Singapore continued to hold the top position, with inflows rising sharply, while Japan also saw substantial growth, largely driven by large-scale investments in the financial services sector.
Speaking on the trend, Commerce and Industry Minister Piyush Goyal recently revealed that American companies had committed around $60 billion in fresh investments over the past few months. This surge in US FDI follows the 2023 amendment to India’s double taxation avoidance agreement with Mauritius, which removed several tax benefits previously enjoyed by investors routing capital through the island nation. As a result, Singapore has emerged as the most preferred conduit for foreign equity flows into India, accounting for roughly one-third of total equity inflows during 2025-26.
Despite the shift away from tax havens, certain jurisdictions continue to attract significant capital. The Cayman Islands, for instance, saw its equity investments into India jump from $371 million in 2024-25 to $2.1 billion in 2025-26, although government officials cautioned that this spike may be driven by a small number of large transactions rather than broad-based investor interest.
Sectoral patterns in FDI also underwent notable changes in 2025-26. Computer hardware and software emerged as the leading recipient of equity investments, overtaking the services sector for the first time. Analysts attribute this shift partly to a surge in investments in data centres, as global technology firms expand their digital infrastructure in India. The food processing industry recorded a more than five-fold increase in equity inflows, while the sea transport and related activities sector saw a staggering 30-fold rise, with investments reaching nearly $2 billion in 2025-26.
Goyal emphasized that the government is actively working on multiple proposals to further boost investment inflows. “We are continuously addressing challenges related to increasing self-reliance, particularly in areas where our supply chains are critically dependent on certain geographies,” he stated, underscoring the administration’s focus on reducing import dependence and strengthening domestic manufacturing capacity.
The data reflects a broader reconfiguration of India’s FDI landscape, with traditional tax havens losing ground to direct investment from major economies, particularly the US. The government’s recent policy measures, including the renegotiation of tax treaties and the introduction of production-linked incentive (PLI) schemes, appear to be reshaping investor preferences and redirecting capital flows toward sectors aligned with India’s long-term economic priorities.
