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Business News/ Economy / Foreign investors keen on India but transparency key factor: WEF investment head
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Foreign investors keen on India but transparency key factor: WEF investment head

FDI equity inflows into India declined 7.7% in the September quarter, although India’s economic growth exceeded expectations

Matthew Stephenson, head of investment and services, World Economic ForumPremium
Matthew Stephenson, head of investment and services, World Economic Forum

NEW DELHI : Apart from a stable regulatory and policy regime, transparency in decision-making and information flow are key to attracting foreign investors to emerging economies such as India, said Matthew Stephenson, head of investment and services at the World Economic Forum.

Foreign investors are keen on emerging markets, especially India, at a time of slowing global growth, but want the right information before making a decision, Stephenson said, speaking with Mint on the sidelines of the World Investment Conference 2023. 

“You can’t calculate your costs if you don’t have information. Investors have to have an analysis of their rate of return," he said. “I think (India is) a good story thanks to the economic reforms, which India is benefitting from now."

As things stand, a slowdown in global growth has impacted foreign direct investment (FDI) inflows into India. Tightening of interest rates due to nagging inflation, especially in advanced economies, has led to a slowdown in business, investment and trade.

In the July-September quarter (Q2, FY2024), FDI equity inflows into India declined 7.7% annually to $9.5 billion, show data released by the Department for Promotion of Industry and Internal Trade (DPIIT).

Total FDI, which includes equity inflows, reinvested earnings, and other capital declined 7.8% annually to $15.3 billion in the same period.

The Indian economy, however, surpassed expectations to clock 7.6% GDP growth in the September quarter, following up on the 7.8% growth in the April-June quarter, on improved consumption, stronger manufacturing, and higher construction output.

Encouraged, the Reserve Bank of India raised its economic growth estimate for FY2024 to 7% from its earlier forecast of 6.5%.

In comparison, the global economy is expected to grow at 3.1% during calendar year 2023, according to S&P Global.

“I think there is a lot of opportunity in India. The country is growing fast," Stephenson said. “I think investors are looking at fundamentals, and they are looking at a longer term for their investments here."

On the slowing of foreign investments into India amid monetary tightening in advanced economies,  Stephenson said the rate of return needs to compensate for the higher cost of capital.

“FDI are typically long-term investments, unlike foreign portfolio investment (FPI). Investors who are in it for the longer term need to grow their investment every year," he said.

Finance minister Nirmala Sitharaman has in the past pitched for regulatory impact assessment to critically assess the effects of proposed and existing regulations and non-regulatory alternatives.

Time limits to decide applications under various regulations should also be named in the interest of ease of doing business, Sitharaman had said in July.

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ABOUT THE AUTHOR
Rhik Kundu
Rhik writes about the Indian economy and its crucial indicators. He is constantly navigating corporates, decoding policies, and dabbling with everything in between.
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Published: 18 Dec 2023, 06:19 PM IST
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