With China facing a bleak economic prospect on the back of a construction sector meltdown, India appears to become one of the better investment destinations for overseas investors, economists said.
“Clearly, India seems to be enjoying the TINA (there is no alternative) factor, as globally all countries are facing the churn and India seems to be the best placed jurisdiction in terms of growth and inflation outlook in FY23,”
group chief economic adviser Soumya Kanti Ghosh said in a research report.
The investment inflows are a reversal of a trend seen since the outbreak of the Russia-Ukraine war.
“Investors do see India as one of the best performing economies in 2022 as reflected also in the IMF growth projections,” said Madan Sabnavis, chief economist with
. “Also all economic data, barring export, do indicate that the Indian economy in the first four months is positive and stable, indicating that we have been quite resilient to the external disturbances like Ukraine war or oil prices spiking,” he said.
IMF revised India’s FY23 growth projection at 7.4%, which is significantly higher than many developed economies. This is also higher than Reserve Bank of India‘s projection of 7.2%.
The first four months of the current fiscal were however saw investment outflows of $14.7 billion from India, putting pressure on the local currency.
India’s foreign exchange reserves also depleted by a little over $42 billion since April to $564 billion at the end of August 19.
RBI has over the last couple of months taken a slew of measures including easing foreign investment norms to attract dollar inflows.
India will also likely gain in terms of foreign inflows go as China slows down in terms of new investment intentions,
‘s Ghosh said. “We believe the China story may now be facing clear headwinds and India is likely to benefit from such stark realities over the longer term,” he said.