Foreign portfolio investments in India significantly improved in the current calendar year, after receiving the second-highest investments in the last five years. The country received Rs 1,36,835 crores as FPI in 2019, while it was heavily withdrawn to the extent of over Rs 80,000 crores in 2018, according to the National Securities Depository Limited (NSDL). The net investments may have likely increased much more than the present level if Finance Minister Nirmala Sitharman had not announced the tax surcharge on foreign portfolio investors functioning as trusts in India. The minister earlier said FPIs should consider the option of structuring themselves as companies rather than trusts to avoid paying the increased surcharge announced in Budget 2019.
Even though the government later withdrew the move, the fear of higher taxes adversely affected the investments in the months of July and August and remained low in the following month as well. However, in the months of October and November, India received nearly Rs 16,000 crores and Rs 23,000 crores respectively.
Also Read | Foreign investors return to India: FPI at 6-month high in October after govt withdraws super-rich tax
The foreign investors invest in a country’s market in the form of FPI, which is aimed at earning a lucrative return from the market. Unlike FDI, the amount invested in the form of FPI is not aimed at developing the country’s infrastructure. Political movements and policy changes largely affect the FPI investors’ decision to invest in a country’s market and that is why there is a heavy fluctuation in the FPIs in recent years.
FPIs worth Rs 80,919 crores were withdrawn in the last calendar year, while it was invested over Rs 2 lakh crores in 2017. The FPIs were again withdrawn to the extent of Rs 23,079 crores in the demonetisation-year of 2016, before which there was an investment of Rs 63,663 crores in 2015.
Source: Financial Express
