Indian Economy News | FDI Inflow: India’s ‘Neutral Geopolitics’ in the Spotlight?

Indian Economy News | FDI Inflow: India's 'Neutral Geopolitics' in the Spotlight?

India has become a hot spot for FDI inflows for some time now as its focus on geopolitical matters has paved the way for something extraordinary. When we look at the statistics in play, the Total FDI inflow in the country in FY 22-23 is about &70.97 Bn and the total FDI equity inflows stand at $46.03 Bn as per the latest Indian economy news that’ available. 

This is quite a unique number as it suggests that there is quite a lot of inflow of funds into India which is a great aspect of the economy. However, the most recent studies have found out that India’s neutral geopolitician stance in this conflict-ridden time has heeded well for the state. 

Let’s analyze how!!

Indian Economy News | The Recent FDI Outlook for India:

India’s geopolitical position needs to be given attention. In a recent interview from ET, Mr.  Claudio Irigoyen, head of global economics research at Bank of America said that India’s neutral geopolitical position has benefited the country in terms of FDI flows and international business. The redirection of FDI into the friendly destination could be seen in the data and India is benefiting in particular relative to China with regards to FDI coming in from the US. 

He further said that the “Sweet spot’ for emerging markets could be the second quarter of 2024. 

So before we go into the details, let’s analyse the latest Indian economy news, understand why this has happened over the past few years and how geopolitical strategies are to thank for this. 

Indian Economy News | Beginning of Consistent FDI Inflow and Reasons For It:

Indian economy news and reasons for consistent FDI inflow

Since India’s independence, India has maintained quite a balanced relationship with the superpower while also maintaining an important presence in the geopolitical atmosphere. Ever since the covid 19 pandemic, several economies have been plagued by this unforeseen event, however in August 2021, the world geopolitical scenario changed dramatically. 

The USA’s exit from Afghanistan had prepared it to concentrate on its primary preoccupation, the Indo-Pacific. The US in its efforts to be the central character failed when Russia pulled a ‘fast one’ on them. 

The ensuing Russia-Ukraine conflict has transformed the global equation in several ways that other strategic events have in recent years. And this has changed the geopolitical landscape of the world forever. 

So let’s get back to India’s glory in all of this. 

Playing the Balancing Game:

The Ukraine Conflict was quite a brutal scenario but it opened the door for new opportunities in the geopolitical scene. In several interviews as well as a news article, India’s representatives have drawn a lot of international attention by refusing to play politics about blocs and playing the humanitarian grounds across the global system. 

While examining India’s relationship with the US and Russia, India has kept an equal distance between both to not cause a ripple in their relationship. 

One of the main reasons why the West is adamant about pleasing India is due to the Russia- Ukraine war where India is seen as a deciding factor in the whole negotiations. Here’s why India is the ‘chosen one’:

  • India has taken an independent diplomatic stance
  • It retains a key strategic position
  • India has also taken a neutral approach to the UN, thereby staying away from the UN decisions and US-led sanctions against Russia and continuing its crude oil trade with Russia. 
  • Even in the case of the Middle East conflict India took a ‘humanitarian angle’ wherein aid was shipped to both Palestine as well as Israel in its efforts to aid the injured or grieving. 

International organizations and events: 

It has been a busy year for India as BRICs expanded its organization, India hosted the G20 meet in extravagant positions and India joined Quadrilateral Security Dialogues (QUAD) in the previous year. 

India’s recent high activity with organizational strategy has contributed quite a lot. Connecting with other economic and strategic groups and finding opportunities for further economic and strategic advantage is one of India’s latest and most fairing subjects. 

Even though the collaboration with the players has created a solid stand, India has kept the calm that it is prioritizing the National interests of the states more than that of other players in the Industry. 

It all started for India as she joined the Quadrilateral Security Dialogues (QUAD) for the Indo-Pacific with the United States, Japan and Australia thereby seeking a common rule-based system for the area that would encompass all states in the geographical region on an equal footing. 

In India’s plan to expand its reach, India has been

  • Creating closer bonds with Russia, Afghanistan and Central Asian nation
  • Attempts are being made to make the International North-South Transport Corridor (INSTC).

And so much more as they progress. Hence, India is seen as one of the FDI hotspots of the world. 

TheLove thy Neighbour’ Policy:

“Love thy neighbour” was the policy and stand that India took at the initial levels and continues to do so while cruising through the geopolitical sphere. 

The policy had strived to build friendly and synergetic ties with the South Asia neighbours. 

  • India’s vaccine diplomacy during the COVID-19 outbreak helped several nations. India has donated & 10 million to the SAARC fund to fight the pandemic as well. 
  • The Indian government had earmarked INR 62,920 million for development assistance in 2022 – 23.
  • This initiative can also be seen when $1 billion during Sri Lanka’s time of need. India sent fuel aid as well as food grains to ease the shortage. 

Through this, an image was formed in the mind of neighbouring countries that if India grows forward, then they will too indirectly. 

Upgrading strategies consistently:

India is adamant about standing strong as an independent nation that isn’t affected by outside forces. 

As the world began to split into 2 sides, India had the capacity and capability to face the fractured globe and stand on its platform. 

A self-reliant posture has made quite a big impact on both local and international levels. In politics, a self-sufficient government is typically popular as well. 

Owing to that, India now has quite a noticeable presence in international organizations as a continuation of its recent strategy. The EU, ASEAN, BISTEX, BRICS, IPS, QUAD and even the G20 nations owing towards the recent meet seek to cooperate more with India for fruitful gains. 

Indian Economy News | Mr.Caludio Irigoyen’s observations on the India FDI Inflow:

Coming back to the topic at hand and Mr. Claudio Irgoyen’s, Head of global economics research at Bank of America comments on the FDI inflow in India and his viewpoint is quite interesting. 

India’s FDI inflow amidst geopolitical tensions:

He goes on to explain that India remains an attractive investment destination due to the rising geopolitical tension. The US is currently its trading partner as well as one of the main sources of FDI. The neutral position taken by the country in terms of FDI inflow is beneficial for international business. 

As per the data that has been amassed and also latest updates coming through Indian economy news on a global scale, he explains that India is at a more relative advantage than China in FDI coming in from the US. 

Stable long-term flows like FDI and potential flows keep India in the top three concerning return and even the new geopolitical equilibriums are headed towards that space. 

Redirection of Funds:

In this scenario, he explains that patterns are being seen wherein trade is being redirected towards friendly countries. 

If China’s exports are taken into account, it is exporting less to the US< Europe and Japan and exporting more towards the Belt and Road countries. 

Hence, US funds are to be seen to be redirected towards other countries and India has a chance to be one of the recipients. 

FED interest rate cuts and FY 2024 outlook:

The image depicts a relation between Indian economy news and also the ED rates outlook for 2024

In the interview, a question was raised:

“The abrupt transition to higher interest rates globally since last year has caused much turbulence in emerging markets. When can we expect some relief? 

He went on to say that looking from a macro perspective, concerning the emerging market in general and assuming that the baseline scenario is correct and materializes, probably the sweet spot for the emerging market would be around the second quarter of next year. 

As per his assumption, the US Fed would start cutting rates in June, probably around March and the market will reprice the easing cycle. 

Hence, the sweet spot will appear!!

Indian Economy News | A Word from Commodity Samachar:

Indian Economy News of the FDI inflow is quite a positive outlook for India and Commodity Samachar’s Head of Research, Ankit Kapoor had this to say. 

“ India has always shown a positive outlook towards geopolitics. They do not get involved in unnecessary issues, do not provoke others and maintain a common ground due to which an environment has been created to pave the way for a rising economy.

The Indian government has currently paved the way for trust within foreign investors and hence there is a steady inflow. However, what investors as well as traders would have to look forward to is the fact that 2024 is an election year. If the current government changes, then there will be circumstances wherein estimations might change and hence its important to keep an eye on the economy.”

Commodity Samachar
Learn and Trade with Ease

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