Global capital is flowing toward the United States amid an artificial intelligence boom and industrial revival policies, raising questions about India's long-term investment appeal as the world's fastest-growing large economy. Indian conglomerates have announced new investments in America this year even as domestic policymakers voice concerns over sluggish private sector spending at home.
Earlier this month, India's chief economic advisor reportedly criticized private firms for not increasing capital expenditure despite strong profits. Instead, businesses are directing funds overseas. Reliance, the country's largest business group, is investing in the U.S. to build what President Donald Trump described as the "first refinery in 50 years." Indian billionaire Gautam Adani is reportedly planning a $10 billion investment that would create 15,000 jobs.
On May 6, the U.S. Embassy announced that Indian companies plan to invest over $20 billion across industries in America, a move expected to generate thousands of jobs and bolster supply chains. Experts note that the U.S. combines deep consumer markets, technological leadership in AI, and manufacturing incentives that India struggles to match.
"The U.S. is the market Indian firms cannot ignore," said Alexandra Hermann Prasad, lead economist at Oxford Economics. She added that a U.S. footprint can also serve as "a hedge against future tariff risk, localization requirements, and 'Buy American' procurement preferences." India's per capita income remains under $3,000, limiting consumption spending even though it is the fastest-growing consumer market.
This shift comes as foreign capital flows to India already weaken and the rupee hits record lows against the dollar. Foreign direct investment reached $90.8 billion on a 12-month trailing basis ending January 2026, up 13 percent year over year, according to a Morgan Stanley report last month. Yet higher repatriation by foreign firms and increased overseas investment by Indian companies pushed net FDI to a "near all-time low."
Repatriation exceeded $50 billion for a second straight year while Indian companies' overseas investment climbed to $35.8 billion, rising 2.6 times over two years. "Instead of profit reinvesting, global firms are 'harvesting returns' from India to finance investments elsewhere," said Hanna Luchnikava-Schorsch, head of Asia-Pacific Economics at S&P Global Market Intelligence.
More than half the capital raised through initial public offerings in India last year went to provide exits for existing investors rather than business reinvestment, noted P. Krishnan, chief investment officer at Spark Asia Impact Managers. "Everybody says that a 20-year outlook on India is way better than the two-year outlook," Krishnan said, yet this has led to more offers for sale instead of fresh capital raising.
Global capital is moving toward AI, advanced manufacturing, and high-end tech in markets such as the U.S., Korea, and Taiwan. "The U.S. is doing everything right for itself," said Rajat Rajgarhia, chief executive of institutional equities at Motilal Oswal Financial Services, pointing to the growing number of trillion-dollar market cap companies in AI and tech.
India, by contrast, is still building scale in these sectors. "As an economy, India needs to reinvent" by developing next-generation businesses at global scale, Rajgarhia told attendees at the Motilal Oswal Conference 2026. Until then, investor sentiment is likely to stay cautious, experts said.
Separately, U.S. authorities have offered legal relief to Gautam Adani regarding past charges of bribery and fraud. Air India has canceled 27 percent of international flights this summer due to Iran-related airspace restrictions and high fuel costs. Domestic investors helped prevent a market freefall after foreign selling last year, according to the CEO of India's oldest stock exchange.
U.S. Secretary of State Marco Rubio is scheduled to visit India from May 23 to 26. Policymakers in New Delhi continue to monitor these capital movements closely as they seek to strengthen reinvestment incentives and accelerate advanced manufacturing ecosystems.