Increasing FDI Inflow Beneficial to India’s Economic Growth
According to a report released by Moody, there has been a surge in the inflow of Foreign Direct Investment (FDI) to India in the current fiscal. Analysts predict that this increasing trend is likely to continue in the coming quarters on account of the country’s pro-growth policy agenda.
According to the reports released by the Global Credit Rating Agency, the surge in the inflow of FDI to India is likely to remain buoyant in the coming months of the current financial year as well as the years beyond. In the words of the report, it said “We believe that FDI will continue to perform well for the remainder of fiscal 2015 and beyond”.
Benefits of the FDI Inflow:
- Moody’s statement revealed is expectations of India witnessing an economic growth that will pick up materially by the next fiscal year. He also added that the growth outlooks for Brazil and Russia remain and will continue to remain precarious while China is likely to witness an economic slowdown.
- In a situation like this, the rising inflow of Foreign direct investment towards India will be beneficial for the country and plug the shortfall the country is facing at the moment.
- The inflow will also be beneficial because they are less volatile when compared to the portfolio capital.
- These will consequently help in reinforcing the economy’s resilience to external headwinds such as monetary policy normalisation in the US and deflationary risks in the Euro Area.
- India will find itself a more stable funding source to make up for the current account deficit which is necessary to improve the economy’s exposure to external headwinds. This was stated by Moody himself in his research note.
Possible Reasons of the Inflow:
The newly formed government has introduced several pro-growth policies. These policies have been predicted to support the direct capital inflows.
The sanguine growth outlook that India is exhibiting currently is also likely to encourage inbound foreign direct investments.
Current Estimates:
The Net FDI Inflow as per recent statistics amount to a total of 14.1 billion USD in the first five months of 2014-15. This accounts for a 33.5% increase as compared to the same period in the last fiscal year.
Source: Business Standard
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