Irrespective of rating upgrade or downgrade, India has continued to enjoy the trust of foreign investors, both in terms of foreign portfolio investment (FPI) and foreign direct investment (FDI).
It is the government’s policies, macroeconomic fundamentals, and the outlook that foreign investors have on an economy that matters.Even as various rating agencies cut India’s rating amid a major economic downturn due to coronavirus superimposed on a deep slowdown, RBI Governor Shaktikanta Das said that foreign investors’ trust in India is intact. Irrespective of rating upgrade or downgrade, India has continued to enjoy the trust of foreign investors, both in terms of foreign portfolio investment (FPI) and foreign direct investment (FDI), Shaktikanta Das added. It is the government’s policies, macroeconomic fundamentals, and the outlook that foreign investors have on an economy that matters, the RBI Governor further added in his interview published in RBI’s May bulletin.
Citing the comparatively much better information provided by the internet and electronic media, he said that the investors are far more informed than two decades before. However, he did not completely sideline the significance of rating agencies. Shaktikanta Das said that the rating agencies do influence some foreign investors who follow their own methods of indexation where there is the application of ratings for investment. However, he again mentioned that the foreign investors in the last several years have exhibited their trust in the Indian economy irrespective of the rating upgrade or downgrade.
However, with the current crisis of sentiment across the world, India has faced a severe hit on the foreign investments’ front. The coronavirus-led disruptions in the markets and businesses made the FPI investors dramatically pull out investment in the month of March 2020.
The net FPI withdrawal in March stood at an all-time high of nearly Rs 1.13 lakh crore, according to the National Securities and Depository Limited (NSDL). This has also led the FPI investors to become net sellers for the two straight years, FY19 and FY20. The plight of FPI from the Indian market is still continued to date.
Also, during the first 9 months of the last fiscal, the FDI inflows amounted to USD 36.8 billion, the highest annual FDI equity inflows in the same period in the past 16 years, said a report by Care Ratings. But, the possibility of a global recession has made the future of FDI in certain sectors ambiguous.