India delivering 'good returns': FM Nirmala Sitharaman on FII selloff

We are building to be an investor-friendly country, says FM

The Indian economy is currently delivering good returns to investors who are booking profits, which partly explains the outflows observed in the equity market by foreign institutional investors (FIIs), Finance Minister Nirmala Sitharaman said here on Monday at a post-Budget press conference. Additionally, the finance minister highlighted that India is looking to be an investor-friendly country. 

 

Therefore, the government has taken several measures in the past few years for rationalisation of Custom duties.

 

“FIIs also go out when they are in a position to book profits. The Indian economy has an environment today wherein investments are yielding good results and profit-booking is happening,” Sitharaman said.

 

 

Since October last year, foreign portfolio investors (FPIs) have sold around ₹2 trillion worth of Indian equities, and markets have come off their highs as a result. FPIs have sold over $10 billion (more than ₹97,000 crore) worth of Indian equities in the first six weeks of 2025.

 

The selloff has been driven by a combination of slowing corporate earnings and shifts in US policy, which have made US debt securities more attractive and strengthened the dollar.

 

Increased selling by FPIs has driven the benchmark Sensex down by approximately 12 per cent from its all-time high at the end of September 2024.

 

Finance Secretary Tuhin Kanta Pandey said FIIs keep moving up and down, depending on where they want to park themselves.

 

“It is not true that the FPIs are moving from one emerging market to another. Whenever there is global uncertainty, they tend to go back where they came from — the US. In terms of resilience, Indian markets have held,” he said, adding that in real terms, the Indian economy remains the fastest-growing large economy.

 

“Indian economy will continue to grow despite global headwinds. We have to face global headwinds and we are in a strong position to face them,” Pandey said.

 

FPI outflows commenced in October 2024, initially triggered by China's stimulus measures designed to revitalise its struggling economy. The subsequent election of Donald Trump as US President exacerbated global concerns, as his campaign promises were perceived as potentially disruptive to the global economic order. This shift in sentiment diminished the attractiveness of emerging markets and simultaneously increased demand for US debt securities. 

 

Inflation and tariffs

 

Speaking on the impact of Trump's “reciprocal tariffs” remark on Indian economy, Sitharaman said: “For the last two years, India has taken several measures and is continuing to take measures, even in this Budget, for rationalisation of Customs duties and their application. Safeguard duties and anti-dumping duties that we levy are also being periodically reviewed.”

 

“This Budget has shown that there is a major step forward in terms of reforming India’s Custom duty and the regime that governs it. We are building to be an investor-friendly country and, as a result, the duty cuts and the rationalisation that are being announced (are part of) a continuing process,” Sitharaman added.

 

Last week, Prime Minister Narendra Modi met the US President and both the leaders agreed to begin negotiations and finalise a “mutually beneficial” bilateral trade agreement (BTA) within the next seven-to-eight months.

 

“Both US and India have agreed to have a bilateral trade agreement by fall. The statement also highlights the reciprocal measures on both sides which have been taken for facilitating each other’s trade,” Pandey said on the issue of reciprocal tariffs.

 

“We have done a lot of rationalisation. On industrial goods, out of 8,000 tariff lines, about 6,000 are below 10 per cent. First thirty of the most important US imports into India have a duty rate ranging from nil to 0.5 to 2.5, and so on. There would be only a very few items where there would be a higher duty. These things will be highlighted during negotiations for the bilateral trade agreement,” Pandey said.

 

Separately, commenting on inflation, Sitharaman said: “Inflation has been well within a certain band and the last declared numbers have shown that it has come down very close to 4 per cent.

 

“Inflation is being monitored regularly, both from the supply side and by the Reserve Bank of India (RBI) from the monetary side. And that is one of the reasons why the RBI has chosen to cut interest rates after nearly four-five years. For inflation management, supply side measures and RBI’s monetary policy are working in sync to favour growth in the country,” the finance minister added.

 

Earlier this month, the six-member Monetary Policy Committee (MPC) of the RBI reduced the policy repo rate by 25 basis points (bps) to 6.25 per cent, against the backdrop of easing inflation and slowing economic growth, marking the first interest rate reduction by the central bank in almost five years.

 

The RBI has retained the inflation forecast for 2024-25 (FY25) at 4.8 per cent, and projected headline inflation to average at 4.2 per cent in FY26. The central bank has projected a 6.7 per cent gross domestic product (GDP) growth rate for FY26.