Bullish at the health of the economy and expecting rich future dividends, foreign investors are continuing to bet on the Indian market. Reportedly, within the first ten days of September, Foreign Portfolio Investors (FPIs) have poured in a net sum of Rs 7,605 crore in the Indian markets. While Rs 4,385 crore was pumped into equities, the rest, Rs 3,220 crore was pumped in the debt segment during September 1-9.
The investors have picked up from where they left in the previous month as FPIs were net buyers to the tune of Rs 16,459 crore in August as well, with a majority of investment coming in the debt segment.
In layman terms, FPI refers to investing in the financial assets of a foreign country, such as stocks or bonds available on an exchange. The FPI flows are only expected to increase as India presents higher growth opportunities, which the global investors can no longer ignore.
Even after a devastating second wave of the pandemic, the Modi government managed to wade through the testing waters and is now reaping the reward for it. The reform-laden approach has been the cornerstone for this success.
India at the cusp of CapEx cycle
As reported by TFI in one of its op-eds dated August 13, Bank of America in its recent report stated that India sits at the cusp of a multi-year CapEx cycle. The brokerage firm believes India could be staring at a CapEx cycle similar to that seen between the financial years 2002-03 and 2011-12.
However, it doesn’t come as a surprise. With the government focusing on infrastructure spending, including investment on roads, railways, ports, and low-cost housing despite a raging pandemic, the cyclical growth was manifesting itself. The government’s impetus through $25 billion surplus allocation for CapEx schemes and $27 billion for PLI schemes has sent the right message across to business investors at home and abroad.
Speaking of PLI, India’s merchandise exports in August touched $33.14 billion, 45.17 per cent higher than a year ago and 27.5 per cent over the pre-pandemic level of August 2019. The government’s make in India and as a corollary, ‘Aatmanirbhar Bharat’ push to become the factory of the world has been received well by the globe. And the PLI scheme has had a pivotal part to play in the rise in exports.
Increased Foreign Direct Investment
While investment in bonds and stocks through the FPIs continue to soar, the Foreign Direct Investment (FDI) has scaled new heights as well. Despite the UN Conference on Trade and Development report stating that global FDI flows plunged by 35 per cent due to COVID, FDI in India increased by 27 per cent to USD 64 billion in 2020 from USD 51 billion in 2019.
While the foreign investors continue to pump the liquid cash, on the domestic front, the GST collection for August crossed the one lakh crore mark after doing so in July as well. The gross GST revenue collection stood at Rs 1,12,020 crore which is 30 per cent higher than the previous year – indicating that the economy was indeed recovering at a faster pace.
All the indicators suggest that the Indian economy is recovering at a miraculous pace and if nothing, the growing trust of the global investors to pump their money into Indian markets is a solid endorsement of PM Modi’s economic policy.