Expectations on FDI to increase
Though many, including RBI, fear an outflow of FII funds when US interest rates begin to turn, the obvious antidote to that is increased FDI. While the Japanese government has committed to invest $35 billion in India over the next 5 years, media reports suggest President Xi Jinping of China will announce a number around three times as large.
Given average annual FDI inflows into the country over the past five years have been around $28 billion—FII flows were $22 billion—that’s a lot of money India is hoping to get from Japan and China and equals around half of all current flows from both FII and FDI. While the amount is more than enough to stabilise the rupee—and we are not even talking of the $50 billion swap agreement with Japan—the obvious question is of whether India will be able to absorb it.
Given the huge infrastructure deficit, there is little doubt India can do with the money, but that is of little consequence if projects are not cleared in time to be able to use the money.
Source: The Financial Express
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