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Expansion of Indian Economy

Expansion of Indian Economy


Recently, the Indian growth story continues to expand as is demonstrated by the trends in FPI, FDI, and Corporate Bond Market flow that indicate and underline the beliefs of investors in the strength and resilience of the Indian economy.


  • COVID-19 has drastically affected the investment climate in all economies of the world, causing a sharp decline in the demand and supply equilibrium everywhere.
  • The investment sentiment in the Indian economy has been buoyed by the frequent and active intervention of the Government of India despite being hit by a worldwide pandemic.

Role of Foreign Portfolio Investment:

  • October and November 2020 have witnessed a significant resurgence in FPI inflows driven primarily by equity inflows resulting in the highest ever FPI inflows for a month for India.
  • The inflow in November 2020 is the highest amount of money invested ever since FPI data has been made available by the National Securities Depository Ltd.
  • FPI flows are known to be less resilient and more sensitive to changing market conditions.
  • The investments through the FPI route are therefore gauged through the metric of net inflow and outflow.

Role of Foreign Direct Investment

  • The total Foreign Direct Investments (FDI) inflows into India during the second quarter of the financial year 2020-21 have been US$ 28,102 million, out of which FDI equity inflows were US$ 23,441 million or Rs. 174,793 crore.
  • It takes the FDI equity inflows during the financial year 2020-21 up to September 2020 to US$30,004 million which is 15% more than the corresponding period of 2019-20.
  • Both FDI equity inflows and total FDI inflows into India have shown a secular rise over the years, with 2019-20 the year with the highest FDI in the last six years.
  • The measures taken by the government on the fronts of FDI policy reforms, investment facilitation, and ease of doing business have resulted in increased FDI inflows into the country.

Role of Bond Market:

  • In the first half of 2020-21, the total corporate bond issuances amounted to Rs. 4.43 lakh crore, 25% higher than Rs. 3.54 lakh crore in the same period last year.
  • The narrowing spread with G-Secs (Government Securities) stands testimony to the improved risk perception of corporate bonds.
  • The cost of funds also moderated for both the Government and the corporate, on the back of RBI’s monetary easing and liquidity infusion.

Source: PIB