Foreign Investment Policy
Foreign Investment Policy experts say that this decision of the American financial company will also give confidence to the Indian government to make the existing policy of investing outside the country more liberal. It is quite possible that some big announcements will be made in this regard when the full budget is presented in July 2024 after the general elections next year.
Foreign Investment Policy
The decision taken by JP Morgan, the world’s most prestigious investment advisory and investment service provider company, to include Indian Government bonds in its Emerging Market Index is not a sudden decision. The representatives of the Government of India were not only talking to the concerned agency about this for the last three years, but were also giving all the evidence as to how due to their policies, India will remain the fastest growing economy for a long time.
Announcement possible in the next budget
Experts say that this decision of the American financial company will also give confidence to the Indian government to make its current policy of investing outside the country more liberal. It is quite possible that some big announcements will be made in this regard when the full budget is presented in July 2024 after the general elections next year. R Sivakumar, Head (Fixed Income), Axis Mutual Fund, believes that this decision will have a positive impact in many ways.
Change in foreign investment policy
There will be a change in the policy of investing abroad. Currently, Indian investments abroad are generally in the form of reserves and a large part of them are in US securities, which offer very low returns. On the other hand, most of the investments coming to India are in equity and foreign investors earn huge profits in this. Broadly speaking, Indians earn lower returns abroad, while foreign investments earn higher returns in India. This gap will reduce due to listing of Indian bonds abroad.
IBI policies will also be affected
In reality, India greatly encourages investment coming from abroad, whereas there are many obstacles in investment coming from outside India. Now expressing the possibility of change in India’s policies after the decision of JP Morgan, he says that it is time to make the capital account more liberal (more freedom to invest abroad). Experts are saying that the impact of including Indian bonds in a major foreign market index will be visible on some other policies of RBI as well.
For example, if foreign investors invest more in Indian bonds, then the RBI may have to limit the open market buying and selling system (OMO – Open Market Operation) of government securities. Many analysts have said that when Indian bonds get listed from June 2024, there could be investment of up to $25 billion in them within a year. Some experts say that considering the current global situation, this amount could be much higher. In such a situation, future steps of the RBI and Finance Ministry will be decided only after looking at the amount of investment.
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