India’s growth remains strong as multinational operations expand, despite weaker investor sentiment, tariff risks and falling FDI sentiment.
Thirty-six chief economists answered the World Economic Forum’s questionnaire between August 4 and August 20, and one question asked them to name the three places where multinational companies will likely find the most attractive business environment over the next year. In the Forum’s September 2026 Chief Economists Outlook, 40 percent put India in their top three, down from 56 percent in the May 2026 edition. India fell from second place to fourth, behind the United States at 77 percent, South-East Asia at 57 percent and Europe at 49 percent, with China fifth at 31 percent. In a panel that small, the fall works out to an estimated six or seven fewer economists choosing India. It says something about how a well-connected group reads the moment. It is a poll of economists about companies, however, and not a record of anything companies have done.
The same report is emphatic about India’s growth. Of the respondents, 98 percent expect moderate or stronger growth in India over the next twelve months, and 74 percent expect strong or very strong growth, up from 52 percent in May and the highest share for any geography in the survey. That pairing has already been packaged as a paradox, with a growth forecast of 7.1 percent attached to it. That number does not appear in the Forum’s report. The report says India’s growth forecast for fiscal year 2026-27, which runs from April 2026 to March 2027, “was raised to 6.7% in August,” a reference to the Reserve Bank of India’s policy resolution of August 5. The International Monetary Fund’s July 2026 World Economic Outlook Update is lower, at 6.4 percent for the same fiscal year. In the Fund’s table, 7.1 percent is India’s recorded growth for fiscal year 2024-25, and its calendar-year projection for 2026 is 7.0 percent.
Getting the numbers right matters because a larger claim is being built on them. The claim runs like this: national growth and multinational appeal are decoupling, and in an era of geo-economic fragmentation, emerging economies can grow on domestic demand and steady internal policy without bending their rules to please global corporations. It is an appealing idea, and part of it survives contact with the data. The triumphant version does not.
Start with what companies actually did. The Reserve Bank’s foreign investment table in its August 25 bulletin shows gross foreign direct investment (FDI) inflows of $30.7 billion from April to June 2026, about 15 percent more than a year earlier. Repatriation and disinvestment by foreign investors rose only about 5 percent, to $13.4 billion. After also subtracting direct investment abroad by Indian companies, net FDI came to $7.8 billion for the quarter. That is up by nearly two-thirds, and it already exceeds the $6.9 billion net figure for the whole of fiscal year 2025-26 (April 2025 through March 2026). These figures were published five days after the survey closed, so the respondents could not have seen them, but they are hard to reconcile with any story of corporate flight. Nothing in the first quarter of this fiscal year looks like multinationals heading for the exits.
The capital that left more rapidly was portfolio investment. The same Reserve Bank table records net outflows by foreign portfolio investors of $16.6 billion in fiscal year 2025-26 and a further $8.6 billion from April to June 2026. The Forum’s own report notes that the Nifty 50 index was down 7.9 percent for the year as of August 19. The rupee averaged ₹95.44 per dollar in August according to the Federal Reserve’s G.5 release. That is an estimated 8 percent weaker than its average over fiscal year 2025-26, based on the Fed’s daily H.10 series. Energy prices were elevated after the conflict in West Asia broke out at the end of February, which the Reserve Bank’s annual report flags as a downside risk. The Forum does not explain why India slipped in its ranking. The evidence suggests that the survey captured a mood shaped by the currency, oil and tariff risk rather than a change in the fundamentals that bring factories and offices.
Tariff risk, in particular, has sharpened. In July, the Office of the United States Trade Representative (USTR) published a Federal Register notice proposing Section 301 tariffs on 60 economies over their handling of goods made with forced labor, with a proposed 10 percent rate for goods from India, among others. Then, on September 18, the President signed H.R. 5334, the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026. The enrolled text directs the President, within 30 days, to raise duties “to a rate of up to 100 percent ad valorem” on goods from countries that were among the five largest importers of Russian crude oil or natural gas over the preceding twelve months and that make new purchases 30 days or more after enactment, which sets October 18 as the 30-day implementation deadline, subject to the law's conditions and waiver provisions. India, one of the biggest buyers of Russian crude, is plainly exposed. As of September 29, no rate has been set against India, and an interim trade agreement with Washington is still under negotiation. A chief economist filling in a form in mid-August had every reason to hedge on India’s near-term business climate without doubting its growth.
The word “fleeing” has a second source: the headline repatriation numbers. In fiscal year 2025-26, according to the Reserve Bank table, repatriation and disinvestment by foreign investors reached $54.0 billion, equivalent to about 57 percent of gross inflows. Some of that outflow comes from multinational parents selling slices of their Indian subsidiaries on the Indian stock market. Hyundai Motor Company sold 17.5 percent of Hyundai Motor India in October 2024 for about ₹27,856 crore (one crore is 10 million), according to the prospectus. That is roughly $3.3 billion at the Federal Reserve’s October 2024 average exchange rate. LG Electronics offered 101.8 million shares of its Indian unit in October 2025, worth about ₹11,607 crore at the offer price, or roughly $1.3 billion at that month’s average exchange rate. Both offerings consisted entirely of shares sold by the parent. LG’s abridged prospectus states plainly, “Our Company will not receive any proceeds from the Offer,” and Hyundai’s uses the same words. The parents kept control, the plants and the Indian customers. They cashed in part of a valuation that India’s deep equity market is willing to pay for exposure to Indian consumers. That is not flight. It is closer to a vote of confidence in India’s domestic demand, although the balance-of-payments arithmetic records it as an outflow.
The strongest case against the decoupling thesis starts from exactly that arithmetic, and it deserves to be taken seriously. Net FDI of $6.9 billion was equivalent to only about 7 percent of gross inflows, highlighting the unusually large gap between gross investment and the net capital contribution. The Reserve Bank’s annual report for 2025-26 put net inflows in fiscal year 2024-25 at $1.0 billion. If FDI is the main channel through which new production techniques, management practices and export networks enter an economy, then a thin net number is a cost. It would mean India is growing by recycling domestic savings into domestic demand, while the learning that comes with foreign ownership arrives more slowly than it should.
On the money side, the worry is smaller than it looks. Gross fixed capital formation (GFCF) at current prices was ₹30.26 lakh crore from April to June 2026, according to the Ministry of Statistics and Programme Implementation’s first-quarter GDP estimates. One lakh is 100,000, so a lakh crore is a trillion rupees, and ₹30.26 lakh crore is about $320 billion at the quarter’s average exchange rate. On a rough calculation, gross FDI in the same quarter equaled less than a tenth of that investment, and net FDI about 2.5 percent. India’s capital formation is overwhelmingly financed at home, and in real terms it grew 11.9 percent from a year earlier. A decline in net FDI does not, by itself, imply a financing constraint on Indian investment.
Technology is a different matter, and here the cost argument bites. The government’s own account of the electronics program reports that mobile phone exports reached about ₹2.59 lakh crore in fiscal year 2025-26. That is roughly $29 billion at the fiscal year’s average exchange rate, and smartphones are now India’s largest single export. The same release says an external evaluation of the production-linked incentive (PLI) scheme for mobile phones found that domestic value addition had risen to 23 percent in fiscal year 2023-24. Most of the value in those phones is still designed, sourced and captured elsewhere. Closing that gap will likely require more foreign firms bringing component and design work to India, not fewer. At the launch of the World Investment Report 2026 by UN Trade and Development (UNCTAD), its acting secretary-general, Pedro Manuel Moreno, put the point squarely: “A higher FDI number is welcome, but it doesn’t automatically mean stronger development impacts.” What matters, he said, is “new productive assets, stronger domestic firms, better jobs, supplier linkages, technology transfer and access to regional and global value chains.” A country that treats slipping multinational interest as a badge of self-reliance risks giving up precisely those linkages.
The domestic-demand half of the thesis also needs qualifying. Real GDP grew 7.8 percent from April to June 2026, well above the Reserve Bank’s own first-quarter projection of 7.0 percent. Private consumption rose 7.1 percent. But GFCF grew 11.9 percent, exports of goods and services grew 12.0 percent and imports fell 1.1 percent. An estimate based on the ministry’s constant-price tables suggests that investment and household consumption each accounted for roughly half of the quarter’s real expansion, and exports for about a third, with a large swing in the statistical discrepancy offsetting the difference. That is not an economy coasting on shoppers alone. It is an investment-heavy expansion with a strong export contribution. The fastest-growing export lines, electronics and services, are where multinationals are most deeply embedded.
Services make the point even more clearly. The Zinnov-Nasscom GCC Landscape in India 2026 study counts 2,117 global capability centers in India in fiscal year 2025-26. These are the in-house engineering, analytics and operations hubs of foreign companies, and the study puts their revenue at $98.4 billion and their workforce at 2.36 million. These are multinational operations in India that rarely appear as large FDI inflows, because a software center needs far less capital than a car plant. Any account of multinationals souring on India has to explain why they keep building the part of their organizations that India does best.
The other emerging markets in the Forum’s survey point the same way. South-East Asia rose to second place in the multinational ranking, with 57 percent of respondents placing it in their top three, and 73 percent expect strong or very strong growth there. The IMF projects 7.5 percent growth for Vietnam in 2026, revised up, it says, “on account of stronger-than-expected technology exports adding to robust domestic demand.” The region gaining ground in the economists’ eyes is the one most tightly woven into multinational supply chains, not the one most insulated from them. If growth and multinational appeal were truly coming apart across emerging markets, South-East Asia's simultaneous strength on both measures is difficult to reconcile with that broad claim.
Then there is sovereignty. India has kept its screening tools and, on some fronts, has refined rather than dropped them. Since 2020, investment from countries sharing a land border with India, China above all, has required government approval. Press Note 2 of March 15, 2026 clarified how beneficial ownership is defined but left that core restriction in place. That fits the wider pattern in UNCTAD’s launch materials, which say governments want foreign investment “on strategic and conditional terms” and add: “Screening and conditions on foreign firms are also expanding.” In that narrow sense the thesis holds. India is not rewriting its rulebook firm by firm to secure an assembly line.
But sovereignty is still being traded; the counterparty has changed. The same Federal Register notice records that, after consultations and the publication of proposed actions on June 5, several economies, India among them, “have imposed forced labor import prohibitions,” and India was then placed in the lower 10 percent tariff tier. That is a regulatory change made in response to a foreign government’s trade demand, not a corporation’s lobbying. The bargaining that once took place with multinational executives over tax holidays and labor rules increasingly takes place with trade ministries over market access. Emerging economies have not escaped the need to compromise; they now compromise with states that have learned to use tariffs the way firms once used investment threats.
Revised to fit the evidence, the thesis looks like this. India’s growth is increasingly financed at home, and its policymakers no longer need to bend rules for individual companies to keep investment flowing. A drop from 56 percent to 40 percent in a panel of 36 economists is thin evidence of any corporate exodus, and in the months those economists were answering, gross and net direct investment were both rising. The decoupling, where it exists, is between India’s growth and the sentiment of portfolio investors and forecasters, not between India’s growth and the operations of multinationals. Growth and multinational presence remain tightly bound, most visibly in electronics exports and global capability centers. The thin net figure for FDI is a genuine potential cost, because it can slow the transfer of technology India still needs, as a domestic value addition rate of 23 percent in its star export industry makes plain.
Several verdicts are pending as of September 29. The Reserve Bank’s 6.7 percent projection predates the 7.8 percent first-quarter outturn and is due for review at its next policy meeting. The IMF’s full October outlook has yet to appear. Washington’s use of its new Russia-energy tariff authority turns on purchases made from October 18 onward. And the Forum’s next survey will show whether India’s fourth place was a mid-August wobble or the start of a trend. Until then, the most defensible reading is the unglamorous one: the economists grew more cautious, while the companies kept coming.
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