As of September 29, 2024, India's government is considering the establishment of a foreign investment regulatory mechanism aimed at post-investment review and monitoring. This initiative comes in response to a significant surge in foreign direct investment (FDI), which has seen a remarkable 119% increase over the last decade, totaling $667 billion. In the first quarter of the current fiscal year, FDI rose by 47.8% to $16.17 billion, with substantial inflows observed in sectors such as services, IT, telecom, and pharmaceuticals [ee00e7f7].
The proposed regulatory framework is still in its early stages, with discussions focusing on ensuring that FDI is beneficial and originates from legitimate sources. Key sources of FDI in India include Mauritius, Singapore, and the United States, reflecting the country's attractiveness as a leading destination for foreign investors, bolstered by its vast market of 1.4 billion people [ee00e7f7].
In tandem with this regulatory consideration, foreign portfolio investors (FPIs) have also been actively investing in Indian equities, with a total of ₹33,700 crore ($4.1 billion) infused in September 2024 alone. This influx follows a 50 basis point rate cut by the U.S. Federal Reserve, making Indian equities more appealing to global investors [e6275387].
The ongoing interest from FPIs, which has reached ₹76,572 crore ($9.2 billion) in 2024, highlights a broader trend where investors are seeking stability in lower-risk assets amid global economic uncertainties. Analysts attribute this trend to a combination of factors, including the weakening U.S. dollar and a dovish stance from the Federal Reserve [e6275387].
Experts suggest that a dedicated law addressing national security risks in foreign investment could enhance transparency and align with global practices. This regulatory move aligns with the 'Make in India' initiative, launched in September 2014, which aims to attract investment and promote innovation [ee00e7f7]. As the Reserve Bank of India (RBI) considers potential repo rate cuts, market experts are closely monitoring these developments to gauge their impact on future investments [e6275387].
