At Rs 2.74 trillion, FPI flows surpass previous best in FY13: Govt

Foreign portfolio investors (FPI) put in a record amount of Rs 2.74 trillion ($37 billion) during the 12 month ended March 2021. The previous best for the highest-ever FPI flows in a financial year was in FY13, when overseas investors had pumped in Rs 1.4 trillion ($25.8 billion), data provided by NSDL showed.

The Finance Ministry said on Tuesday the sharp inflows last fiscal were due the government’s policy initiatives and economic recovery.

“The robust FPI flows came on the back of faster-than-expected economic recovery supported by multiple tranches of innovatively designed stimulus packages. The government and regulators had also undertaken major policy initiatives directed at improving ease of access and investment climate for FPIs in the recent past,” it said in a press release.

Most emerging markets (EMs) have recorded strong capital flows over the past 12 months underpinned by the stimulus measures taken by the global central banks, mainly the US Federal Reserve.

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However, the flows into India have been greater than most other EMs.

“The increase in aggregate FPI investment limit in Indian companies from 24 per cent to the sectoral cap has been a catalyst for increase in weightage of Indian securities in major equity indices, thus mobilising massive equity inflows, both passive and active, into Indian capital markets,” said the ministry.

The move to treat sectoral cap as FPI investment limit has increased legroom for investment by overseas investors in several companies. This has prompted index providers such as the MSCI and FTSE to increase the weightage of Indian companies in their global indices.

The government has said easing of investment rules for FPIs too has helped. Some of these include “simplification and rationalisation of the FPI regulatory regime, operationalisation of the online Common Application Form (CAF) for the purpose of registration with Sebi, allotment of PAN and opening of bank and demat.”

The record inflows in FY21 reflect the “steadfast confidence of foreign investors in the fundamentals of the Indian economy,” the release adds.

The growth forecast for India in FY 2021-22 has been pegged above 10% by the World Bank, IMF and several global research organisations underscoring that India will continue to remain an attractive investment destination in the near future.