India's growth story faces its toughest test yet in Modi’s third term

India's Prime Minister Narendra Modi addresses the gathering at AI Impact Summit, in New Delhi, India February 19, 2026. Press Information Bureau | Via Reuters In his 12th year as Prime Minister, Narendra Modi continues to be popular in India — but the world's fastest-growing major economy is no longer so popular among global investors. India's growing reputation as an anti-artificial intelligence trade, combined with the economic strain of the prolonged conflict in the Middle East on the Indian economy, is leading to a record exodus of foreign investors from the country, experts said. "India is no longer the obvious, one-way growth story investors assumed it was a few years ago," said Alexandra Hermann Prasad, lead economist at Oxford Economics. While it "remains strong by global standards," the economy is facing headwinds from weaker consumption, fragile investment sentiment, higher energy costs and more selective global capital, she added. Foreign portfolio investors have sold Indian equities worth $29.5 billion so far this year, after selling $18.9 billion last year. On the foreign direct investment front, India has attracted gross capital of over $90 billion on a 12-month trailing basis ending January 2026, up 13% year on year. …