Is India the most lucrative bet for overseas investors?

Since the pro-growth and investor friendly Modi government assumed the mantle of reviving the Indian economy by accelerating long-stalled reforms, India has emerged as the lone shining star of the global economy, which is still struggling to find its footing even seven years after the Great Recession.

The government’s drive to boost the country’s investment climate including the much campaigned ‘Make in India’ reform & hikes in FDI caps in sectors such as defence & insurance, coupled with investor friendly tax regimes have put India on the path of double-digit growth, with the country tipped to surpass China as the world’s fastest growing major economy.

Rolling out the red carpet for foreign investors, the NDA government has raised the FDI cap in the insurance sector from 26 per cent to 49 per cent, whereas the defence sector FDI cap was hiked to 49 per cent from 26 per cent, while allowing 100 per cent FDI in Railways, paving the way for an overseas investment boost. According to government data, FDI in India soared to the highest in 29 months in January 2015 at USD 44.81 million.

Moreover, India’s growing economic prowess has been recognised by leading global rating agencies & top institutions such as World Bank, which sees India clocking 7.5 per cent growth this fiscal as it steps up economic reforms and encourages domestic companies to become "globally competitive".

Rating agency Moody’s also recently revised its outlook on the country from stable to positive while Fitch has pegged India’s GDP growth at 8 per cent in FY 16 with growth set to accelerate to 8.3 per cent next fiscal.

Further, plunging oil prices have come as a major boon for Asia’s third biggest economy which imports nearly 70 per cent of its oil needs. A reduced oil import bill has narrowed India’s fiscal and current account deficits while pushing inflation well below the targeted 6 per cent, allowing room for a double rate cut to revive the investment growth cycle.

Meanwhile, the global economy remains entrenched in a steep slowdown with growth in China plummeting to the lowest in more than two decades; Russia & Brazil are on the cusp of a recession, and a stronger dollar has arrested the US momentum, while Europe and Japan continue to wrestle with deflationary fears, arguably making India the best bet for global foreign investment.

 Road Forward

Foreign investment inflows both FDI and FII’S are expected to increase tremendously nearly more than 2 times in FY15 as overseas investors gains confidence in India’s Modi government, as India requires funding in infrastructure sectors like highway, ports and real estate.

But India also has do its part to realize FDI potential like improving its economic ecosystem, easing FDI regulations, working on regulatory environment and also develop infrastructure from its means.