Foreign Investments are considered crucial for nations, especially for an emerging economy like India. Foreign Investors can be classified majorly as Foreign Direct Investments (FDIs) and Foreign Portfolio Investments (FPIs). FDIs are investments to acquire a substantial ownership stake in a company or project by an investor, company, or government from another country that directly augments the production of goods and services in an economy. FPIs investments by non-residents in Indian financial assets shares, government bonds, corporate bonds, convertible securities, and infrastructure securities. FPIs comprise investment groups such as Foreign Institutional Investors (FIIs), Qualified Foreign Investors (QFIs), and subaccounts. FIIs are big investor institutions Pension Funds, Mutual Funds, Insurance Companies, etc.
In India, both domestic and foreign investments are vital and contribute enormously to the nation's expansion. India is considered one of the fastest emerging economies in the world and a leading country in attracting foreign investments. India has several investment opportunities in its equity market for local and Foreign Institutional Investors (FIIs). Since its inception in 1992, India’s FII investments have largely remained positive at Rs. 278,429.52 crore (US$ 34.29 billion) in 2022 and Rs. 19,696.66 crore (US$ 10 billion) in 2023 (Until June 28th, 2023). The FIIs poured a massive US$ 60.31 billion into Indian equities from March 2009 to November 2010 and lifted the Nifty from around 2,500 to 6,300. Similarly, during the Covid crisis, when the Nifty recovered and surged from around 8,000 (April 2020) to 18,600 (October 2021), the Indian markets saw investments of US$ 38 billion by FIIs. Moreover, FPIs have cumulatively invested US$ 20 billion between March-August (2023) before becoming net sellers in Asia's third-largest equity market in September. Additionally, the Indian rupee is performing better than other major global currencies such as the British pound, Japanese yen, and euro. The government has also liberalized regulations for foreign capital. All these factors have further strengthened India’s position in global markets.
India has taken several initiatives recently to attract more foreign capital to the country. These initiatives have made it an attractive destination for investments. India-focused offshore funds have been able to generate more returns compared to other funds in emerging markets, which has attracted foreign investors to the country. Some of the recent developments in foreign investments are listed below:
The Government of India has taken several initiatives to improve regulations and attract foreign capital. India has set up an international stock exchange for assisting foreign investors investing in the country. It also plans to launch the first India International Bullion Exchange (IIBX) at GIFT City. Apart from these, the government has undertaken several initiatives to attract foreign capital. Some of the recent government initiatives and regulations in the FII space are as follows:
India has emerged as one of the most important global investment hubs in recent years. Despite various challenges such as rising interest rates, excessive inflation in global commodity prices and the threat of a global recession, the Indian economy and markets have shown to be incredibly robust. Indian markets have provided good returns compared to other emerging markets. India is also one of the most attractive FDI destinations. In FY23, India was able to attract FDI of US$ 46.03 billion and has also signed free trade agreements with countries such as the UAE, Australia, Singapore and Japan. This is expected to buoy investors’ sentiment and increase global private investments. India also has a strong start-up ecosystem: the number of Indian start-ups has increased from 471 in 2016 to 92,683 in 2023. India also had one of the best-performing IPO markets in 2021. Favourable government policies, increased infrastructure investment, relaxation of norms and improvement in financial infrastructure can further boost the inflow of foreign capital in the country in future.