DNA Money Edit: Inbound foreign equity investments to shoot up

The drop in inbound foreign direct equity investments in 2018-19 for the first time in six years is not alarming. The latest figures released by the Department for Promotion of Industry and Internal Trade (DPIIT) showed that equity inflows reduced 1% to $44.36 billion year on year. The wait-and-watch policy adopted by global investors before the elections and the volatility in stock markets may have impacted fresh inflows. However, indications are that the numbers would be improved in the current fiscal as the slowdown was partially induced by the unusually-long election process.

As the economy growth slowed to 7% in 2018-19, the lowest in the Modi government's first tenure, the fall is on expected lines. Some big capital expansion projects were on a slow track, with private investments taking a long break. Demand, particularly in the rural sector, remained muted. Economists believe that the fall in inbound investments was in line with the overall weak economic conditions.

All eyes will be on Singapore, which has replaced Mauritius as the largest source of offshore funds, for foreign equity investments. In 2018-19, FDI from Singapore rose 25% to $16.22 billion. This was followed by Mauritius and Japan. India has revised its tax treaty with Mauritius and Singapore, which, analysts believe, will help the country attract dollars and yens this fiscal.

Now that NDA government has received a massive mandate, global investors may swing back to India.