India foreign funds inflow decline |
Foreign funds flow into India is declining fast despite the accommodative global monetary policy stance and rolling back of tax surcharge on FPIs by the Indian government. According to a report, a gamut of factors, such as slower than expected demand growth in major economies, geopolitical and trade tensions and a gradual weakening of the economic growth prospects in India have contributed to a build-up of risk aversion, which has impeded the demand for emerging market debt instruments. Foreign investors have been on a selling spree in the Indian market amid uncertainty over FPI tax and global trade worries. Finance Minister Nirmala Sitharaman in her maiden Budget levied the tax surcharge on Foreign Portfolio Investors (FPIs), which led to fund outflows of Rs 8,319 crore on a net basis in the first half of August. In July, FPIs had pulled out Rs 2,985.88 crore from both the Indian equity and debt markets. While India might occasionally experience pockets of inflows, global capital inflows are unlikely to pick up sustainably anytime soon. The shift in global monetary policy conditions to a relatively accommodative stance is unlikely to revive capital flows into emerging markets like India.
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