GDP: Amid the rupee’s fall, how investors are shunning the Indian economy
When more money goes out of India than what comes in, the rupee’s exchange rate falls or weakens because it essentially means that the US dollars are more in demand relative to Indian rupee. What do data show on investments into India?
4 min readNew DelhiUpdated: Dec 5, 2025 01:14 PM IST
India, thanks to growth potential, has received a lot of foreign investments — either via Foreign Direct Investment (FDI, or investment into things like building a new factory in India) or Foreign Portfolio Investments (FPI, or stock investments). (Archives)
In recent days, the Indian rupee’s exchange rate against the dollar has again made headlines. More often than not, the primary reason for weakness in rupee’s exchange rate has been India’s trade deficit (in other words, the fact that India imports more than it exports) and India’s current account deficit. More simply, more money (read dollars) was flowing out of India than coming in.
But there was always a flip-side to this story: India, thanks to growth potential, also received a lot of foreign investments — either in the form of Foreign Direct Investment (FDI, or investing money into things like building a new factory in India) or in the shape of Foreign Portfolio Investments (FPI, or investing money in the form of buying stocks and shares of company). Historically, the “surplus” on this count — called the Capital Account — papered over the “deficit” on the trade or current account.
To conceptually understand all about these types of flows and understand how rupee’s exchange rate is connected with trade deficit or with the current account deficit, read this edition of ExplainSpeaking.
This edition of GDP is focussed on highlighting how “net” foreign investments in India have taken a beating, and thus contributing to rupee’s weakness. In other words, how the net money flowing into India via this route of financial investments — as against the trade route — has been falling. The use of the word “net” implies that once all the money coming in and going out of India is taken together.
Let’s first look at what has happened to FDI coming into India. In CHART 1, the green line shows the money coming into India as FDI and the red line shows the money going out of India (that is, the FDI for foreign countries).
CHART 1
As the chartshows, since 2021-22, the green line has plummetted even as the red line has surged. In other words, while foreigners are holding back investing in India via the FDI route. This is critical problem because the FDI route is preferred over the FPI route; investments through the FDI route show that a foreign investor is really committed to staying invested in India for the long term. This data is only up to March 2025.
CHART 2 shows what has happened in the current financial year. The story is pretty much the same. The green line is falling and has been overtaken by the red line — Indian investments abroad are more than foreign FDI into India. This is exactly the opposite of the Swadeshi call in many ways.
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CHART 2
What is the “net” result? CHART 3shows that precisely. The “net” FDI into have fallen towards the zero level. The story is the same if one looks at the data in the current financial year.
CHART 3
But this is still only the FDI bit. There is also the FPI investments that India receives. CHART 4 maps the net FPIs and it yet again shows how they are negative. That mean again, more money has been invested by Indians in stocks and share abroad than by foreigners into Indian stock markets.
CHART 4
When more money goes out of India than what comes in, the rupee’s exchange rate fall or weakens because it essentially means that the US dollars are more in demand relative to Indian rupee.
The trend is counter-intuitive: Indian Indian economy is growing much faster than all the comparable economies then presumably the Indian companies would also be doing very well and, by extension, foreign invetsors should be making a beeline to invest in India in every shape or form. Or could it be that the GDP growth rate data is overstating India’s economic momentum?
Udit Misra is Senior Associate Editor at The Indian Express. Misra has reported on the Indian economy and policy landscape for the past two decades. He holds a Master’s degree in Economics from the Delhi School of Economics and is a Chevening South Asia Journalism Fellow from the University of Westminster.
Misra is known for explanatory journalism and is a trusted voice among readers not just for simplifying complex economic concepts but also making sense of economic news both in India and abroad.
Professional Focus
He writes three regular columns for the publication.
ExplainSpeaking: A weekly explanatory column that answers the most important questions surrounding the economic and policy developments.
GDP (Graphs, Data, Perspectives): Another weekly column that uses interesting charts and data to provide perspective on an issue dominating the news during the week.
Book, Line & Thinker: A fortnightly column that for reviewing books, both new and old.
Recent Notable Articles (Late 2025)
His recent work focuses heavily on the weakening Indian Rupee, the global impact of U.S. economic policy under Donald Trump, and long-term domestic growth projections:
Currency and Macroeconomics:
"GDP: Anatomy of rupee weakness against the dollar" (Dec 19, 2025) — Investigating why the Rupee remains weak despite India's status as a fast-growing economy.
"GDP: Amid the rupee's fall, how investors are shunning the Indian economy" (Dec 5, 2025).
"Nobel Prize in Economic Sciences 2025: How the winners explained economic growth" (Oct 13, 2025).
Global Geopolitics and Trade:
"Has the US already lost to China? Trump's policies and the shifting global order" (Dec 8, 2025).
"The Great Sanctions Hack: Why economic sanctions don't work the way we expect" (Nov 23, 2025) — Based on former RBI Governor Urjit Patel's new book.
"ExplainSpeaking: How Trump's tariffs have run into an affordability crisis" (Nov 20, 2025).
Domestic Policy and Data:
"GDP: New labour codes and opportunity for India's weakest states" (Nov 28, 2025).
"ExplainSpeaking | Piyush Goyal says India will be a $30 trillion economy in 25 years: Decoding the projections" (Oct 30, 2025) — A critical look at the feasibility of high-growth targets.
"GDP: Examining latest GST collections, and where different states stand" (Nov 7, 2025).
International Economic Comparisons:
"GDP: What ails Germany, world's third-largest economy, and how it could grow" (Nov 14, 2025).
"On the loss of Europe's competitive edge" (Oct 17, 2025).
Signature Style
Udit Misra is known his calm, data-driven, explanation-first economics journalism. He avoids ideological posturing, and writes with the aim of raising the standard of public discourse by providing readers with clarity and understanding of the ground realities.
You can follow him on X (formerly Twitter) at @ieuditmisra
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