"Riding on huge expectations from the incoming Modi government, global investors are gung ho on the Indian economy which is expected to witness over 100 per cent increase in foreign investment inflows - both FDI and FIIs - to above $60 billion in the current financial year, as against $29 billion during 2013-14," the study projected.
The net foreign investment inflows, led by aggressive foreign institutional investors (FIIs) in the Indian equity and debt markets in 2014-15, are expected to even overtake the figure of $46.17 billion during fiscal 2012-13, one of the best years for overseas investment inflows, it estimated.
"The unfolding scenario also points to easing of prices and lowering of interest rates, the two major challenges that the Indian economy had been facing for some years now," Assocham President Rana Kapoor said.
However, the emerging situation will pose a new challenge to the Reserve Bank to deal as it will have to balance the rupee rate and inflation from the increased liquidity into the system.
The new Finance Minister and the RBI, thus, will have to be on the same page in dealing with this scenario which will see strengthening of Rupee and a further improvement on the current account balance, Assocham said.
In the current fiscal, the FII investment would remain more than the FDI inflows, Assocham said. The expectations are that FII investment in both debt and equity could exceed $35 billion while the FDI money could be above $25 billion.
"If the Modi government is able to take some reform-friendly measures along with taming inflation and earning goodwill of the people, the FDI will do a fast catch-up with the FIIs. The euphoria must be taken advantage of and things will move on from there," Mr. Kapoor said.
Significantly, India will continue to outpace all other emerging economies in terms of FII inflows which would not be affected much by the tapering of the Quantitative Easing by the US Federal Reserve, the study found.
Besides, as the new government goes about removing obstacles in investment, FDI is likely to pick up again in the key infrastructure areas of ports, airports, roads and energy, the study said.
Keywords: Foreign investment inflows, FDI in India, FII in India, Modi government, Modi government monetary policy, Foreign investors in India