India’s Twin Streams Of Investment

FDI May Be Slowing, But A Surge In GCCs Prove Multinationals Are Still Betting Big On Indian Intellect

By Govindraj Ethiraj

When oil giant Chevron monitors its global refinery operations and real-time well data, the eyes watching the screens aren’t just in Texas. They are in Bangalore.

In an era of increasingly complex remote industrial management, the geographic shift of operational control is no longer a surprise.

Yet, there is something striking about the reality that during a global energy crisis, the engineers and leaders determining critical energy flows are sitting in southern India.

The Chevron example is a window into a profound structural shift in global business: the rise of the GCC.

The Scale Of The Shift

For years, multinational corporations outsourced basic IT and back-office functions. Today, they are also seeding and building their own captive hubs in India to drive core technological change.

The numbers are staggering.

There are now over 2,117 GCCs operating across 3,728 units in India. According to industry body Nasscom, these centers generate roughly $98.4 billion annually, fast approaching the $100 billion mark, which constitutes nearly a third of India’s massive $315 billion software services export market.

More importantly, the nature of the work has moved up the value chain.

Of these centers, more than 1,200 possess advanced Artificial Intelligence (AI) and Machine Learning (ML) capabilities, with over 250 operating as dedicated AI/ML centers of excellence.

Driven by a 250,000-strong AI workforce, representing 28% of global GCC AI talent and trailing only the United States, India has become the engine room, in this case for AI bets.

Executives at companies ranging from British Telecom to fintech giant Fiserv told me last week that some of their global AI initiatives, which could include AI-assisted engineering to complex cloud migrations, are often orchestrated out of Bangalore, Hyderabad or Pune.

Yet, a glance at traditional macroeconomic indicators paints a seemingly contradictory picture.

Net foreign direct investment (FDI) into India has slowed dramatically.

Capital, Redefined And Redirected

A recent report from CareEdge Global Ratings reveals that net FDI inflows fell to historic lows in the 2025-26 fiscal year.

In the first 11 months of FY26, net FDI moderated to just $6.3 billion, a sharp plunge from the $35.1 billion average recorded between FY16 and FY20.

This decline, driven largely by higher repatriation by foreign investors and increased outward investment by Indian firms, diverges from historical trends where India’s FDI remained relatively stable during periods of global stress.

How do we reconcile plunging FDI with a MNC corporate footprint that is expanding rapidly ?

Multinationals are setting up new GCCs in India at an average rate of one or more per week.

The demand is so high that GCCs have accounted for roughly 40% of all office space leasing in India over the last decade.

Furthermore, the boom is no longer confined to traditional hubs like Mumbai, Pune, Chennai, and the National Capital Region (NCR); it is spilling over into emerging centers like Coimbatore, Ahmedabad, Kolkata, Vadodara, and Kochi.

The answer lies in the changing definition of capital. While traditional FDI, measured in physical assets on the ground or direct equity investments, has slowed, investment in human resources is accelerating.

Evolution, Not Replacement

A technology services entrepreneur from the UK, who operates offices in Delhi and Coimbatore, told me the immense, untapped potential for mid-sized global companies to establish their own captive centers in India.

Can this rising tide of GCCs and the high-quality employment they generate substitute for traditional FDI?

Not entirely.

The economic multiplier effects of traditional FDI, such as building an automotive manufacturing plant, are vast and immediate, bringing supply chains, hardware technology, and direct consumer market investments that GCCs do not inherently provide.

However, the economic impact of GCCs is compounding in its own right.

The real estate footprint is one useful illustration given the jobs and economy impact of real estate expansion.

On the other hand, high end jobs are helping train a generation of Indian professionals to operate at the highest levels of the global ecosystem.

Rather than viewing the FDI slowdown as a strictly bearish signal, perhaps it is better understood as a market evolution.

Instead of a single stream of traditional capital inflows, India is evidently cultivating twin streams of investment: one focused on capturing the domestic consumer market, and a rapidly expanding one focused squarely on harnessing its people.

For multinational boardrooms, the consensus is clear: you may not be building your next factory in India, but you will almost certainly be building your next algorithm there.

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Rs 1 lakh crore

That’s how much the combined market capitalisation of four of India’s 10 most-valued companies declined last week, even as benchmark indices ended marginally higher. 

Analysts say investors remained cautious amid volatile global cues, renewed tensions in West Asia, persistent foreign investor outflows, and uncertainty around oil prices and interest rates.

Top laggards:

• State Bank of India: Lost Rs 44,722 crore

• Bharti Airtel: Lost Rs 31,167 crore

• Tata Consultancy Services: Lost Rs 28,456 crore

• Larsen & Toubro: Lost Rs 5,372 crore

Top gainers:

• HDFC Bank: Added Rs 15,425 crore

• Bajaj Finance: Added Rs 11,487 crore

• Hindustan Unilever: Added Rs 8,764 crore

• Reliance Industries: Added Rs 6,563 crore

Impact: Analysts expect markets to remain volatile in the near term as investors monitor crude oil prices, geopolitical developments, US rate signals, and the direction of foreign portfolio flows into Indian equities.

Modi's Fuel SOS

Prime Minister Narendra Modi on Sunday called on Indians to embrace fuel conservation, revive work-from-home practices, and cut back on imports, as rising global energy prices strain the country's foreign exchange reserves. Modi urged citizens to prioritise public transport, carpooling, and online meetings, habits widely adopted during COVID-19, to reduce fuel dependency.

"In the current situation, we must place great emphasis on saving foreign exchange," he said.

The Lead: The Prime Minister also asked people to avoid purchasing gold and limit non-essential overseas travel for at least a year. He urged families to reduce cooking oil consumption, calling it both a healthy and patriotic choice.

The Shift: Modi additionally called on farmers to slash fertiliser use by up to half. India, the world's third-largest oil importer, has so far held back from raising pump prices for diesel and petrol despite the global energy surge triggered by the West Asia conflict.

Private Capex Boom

India’s private sector capital expenditure surged 67% year-on-year to Rs 7.7 lakh crore in the first half of FY26, according to the Confederation of Indian Industry (CII), signalling a strong revival in the investment cycle. 

By the Numbers: Manufacturing led the push, contributing Rs 3.8 lakh crore, while services added Rs 3.1 lakh crore. Metals, automobiles, chemicals, communications, and IT drove much of the spending. CII analysed nearly 1,200 companies and found rising capacity utilisation, stronger order books, and faster bank credit growth supporting the investment rebound. 

What’s Next?: “The 67% jump in private capex… is the most important signal yet,” said CII Director General Chandrajit Banerjee. He added that companies now see “a sustained demand environment” and are expanding capacity despite global uncertainty and geopolitical tensions.

FMCG Price Pressure

India’s fast-moving consumer goods companies are preparing another round of price hikes as inflation pushes up packaging, fuel and transportation costs.

Flashpoint: During a recent earnings call, Hindustan Unilever CFO Niranjan Gupta said material cost inflation had climbed to 8-10%, while Dabur India CEO Mohit Malhotra said the company had already raised prices by about 4%. I warned that higher fuel and packaging costs could trigger selective price hikes and smaller pack sizes, while Pidilite Industries flagged a steep rise in input costs.

How We Got Here: Companies linked the pressure to rising crude oil prices, higher freight costs, West Asia tensions and a weaker rupee, all of which have increased the cost of raw materials and distribution.

Old Cars, Big Problem

India's auto industry missed vehicle scrapping targets by 70% in FY26, falling well short of obligations under the Environment Ministry's End-of-Life Vehicle (ELV) Rules, 2025. Against a mandated target of scrapping 7.62 lakh vehicles, only 2.42 lakh were processed at registered facilities, leaving a shortfall of 5.2 lakh vehicles, PTI reported.

Setup: Industry body Society of Indian Automobile Manufacturers flagged to the ministry that automated testing stations were generating negligible ELV volumes, further undermining the sector's ability to meet targets. It has also urged the ministry to permit alternative steel scrap during a phased transition period.

The Core earlier reported on policy gaps that have failed to displace the country's largest informal vehicle scrap hub.

Catch Up Quick: Industry executives blame an unrealistic policy framework, compounded by a March 2026 amendment that stripped out a key compliance flexibility, the ability to count other steel scrap materials toward EPR certificates. Most automakers had banked on this provision to bridge the gap.