FinMin allays fears of US stimulus withdrawal impact on FDI

Global capital markets and some international currencies witnessed knee-jerk reactions after news of QE being trimmed by US Fed first surfaced

Allaying fears that the withdrawal of fiscal stimulus programme in the US will impact foreign investments into India, a Finance Ministry report has said the country is an attractive destination on its own and has remained the third most preferred nation for FDI since 2010.

"Notable liberalisations in FDI policy and in several sectors, a globally competitive workforce, a rapid GDP growth rate and rapidly growing market are the main drivers of foreign investment in India.

"All these are reasons enough to allay fears that the FDI inflow would be reversed with the lifting of the Quantitative Easing (QE) measures in the USA," the report said.

The US has already started winding down Quantitative Easing or fiscal stimulus programme. Global capital markets and international currencies in several countries, including India, witnessed knee-jerk reactions after news of QE being trimmed by the US Federal Reserve first surfaced last year.

The US Fed had been buying bonds worth $80 billion a month to stimulate the American economy after the 2009 global financial crisis. It has now started reducing the amount in a phased manner prompting concerns that the move will curtail investments into countries like India.

FDI into India, estimated as the sum total of equity inflows, reinvested earnings and other capital, was $46.55 billion in 2011-12 and $34.29 billion in the following fiscal. In 2013-14, the inflows stood at $28.8 billion for the period of April-January.

The report said: "India's attractiveness on its own merits was announced by the startling growth rate of 9.3% in the year just next to 2009, the year the global meltdown".

From being a minor player in global FDI environment in 2000, India was the world's 13th largest FDI host country 2009. It is also the global top third most preferred investment destination since 2010.