Even as the economy sees a slowdown, the inflow of foreign investments has remained upbeat, with April-November 2019 witnessing net inflows of $10.7 billion as against outflows of $14.6 billion in the corresponding period of last year. Even the coming months are expected to boost the inflows given the low-interest-rate environment and favourable liquidity conditions in advanced economies, a rating agency said. "We expect FDI inflows of $20-25 bn in H2 2019-20 and additional FPI inflows of around $10 bn for the remainder of the financial year," CARE Ratings said in an analysis.
The economy is undergoing a slowdown on account of both domestic and global factors. In Q1FY20, the economy printed a dismal growth rate of 5 per cent. "The easing of foreign investment rules, the long term domestic growth potential and anticipated stability in the domestic currency (external factors driven depreciation being limited to 2-3%) would also help drive inflows into the country," CARE Ratings also said in the report.
In the ongoing fiscal year, all the months except July-August 2019 saw net inflows of FPIs. After the government proposed to impose a levy on FPIs in July budget, an outflow of foreign funds was seen. However, the rollback of the levy along with another slew of measures announced by the government not only stalled the outflows but also led to a rise in inflows.
Meanwhile, the government will release Q2FY20 GDP data later in the day today. Several agencies have predicted that the growth may slump further in the second quarter below 5 per cent. The last time India's growth rate fell below 5 per cent was in Q2 FY13.