Amid the ongoing conflicts in the different parts of the world such as the Russia-Ukraine war and the Israel-Palestine crisis, Rumki Majumdar, Economist, Deloitte India has said that geopolitical concerns are affecting global investors’ sentiments. She stated that the US-China trade war, election outcomes in key economies and tensions in Central Asia may result in global supply disruptions and capital outflows in emerging markets.
Crude prices above USD90/bbl can put pressure on India’s current account deficit and inflation. The slowdown in China and lacklustre growth in the US may also affect trade and export demand, Majumdar added in the union budget expectations report.
Significant global challenges that defined 2023—high interest rates, macroeconomic uncertainty, regulatory scrutiny and geopolitical risks are expected to persist in 2024. With a strong domestic economy as a backdrop, Indian companies may see M&A as a crucial strategy to help them manage business uncertainty, integrate supply chains and strengthen their market positions, she mentioned.
While Indian business houses are adopting a cautious approach, they are also gauging for momentous M&A activities, post the general elections. ‘’As a result, M&A activities are expected to bounce back soon, thereby creating enormous opportunities for the Indian economy to flourish,'' the economist added.
Notably, ahead of the budget, investors' sentiments in the equity market will be driven by the announcements made by Finance Minister Nirmala Sitharaman. Last week, the Indian stock markets closed nearly unchanged after a period of strong gains, buoyed by positive global cues and a promising start to the earnings season. However, profit-taking on Friday erased earlier advances, leaving the Nifty index at 24,530.90 after reaching a high of 24,854.80.
According to data from the National Securities Depository, foreign portfolio investors infused Rs 15,420 crore into the Indian equity market. The net investment by foreign portfolio investors (FPI) surged to Rs 30,772 crore so far in July, indicating strong buying by foreign investors. Market experts suggest that foreign investors are investing in Indian markets amid a weakening dollar and bond yields. If this trend continues, foreign investment will likely persist, news agency ANI reported.
In FY2024, India’s GDP grew by 8.2 per cent year over year. Despite global geopolitical challenges, a significant portion of this growth was driven by strong domestic demand. Exports also saw a significant uptick in growth in the last quarter. ‘’India’s GDP is expected to grow by 6.5 to 6.7 per cent in FY2025. In April, the IMF predicted the country to grow by about 6.8 per cent in FY2025. Additionally, it expects India’s GDP to reach US$5 trillion by 2027, making it the world’s third-largest economy,'' Majumdar added.
Foster More Avenues For Global Investments In Retail
By 2025, India’s grocery and food retail segment is expected to reach USD 850 billion. Given the sector’s immense potential, the government should revamp FDI policies to make them more attractive to investors and remove regulatory barriers that have hindered foreign investment in the country.
The government currently allows 100 per cent FDI in food retail trading, including e-commerce, for food products manufactured and produced in India, subject to the government’s approval. Expansion to other products manufactured in India would make the sector even more appealing to foreign investors, leading to more investments across the value chain.
‘’To promote seamless growth and harmonious coexistence of traditional and modern retail, the government should consider allowing 100 per cent FDI in multi-brand retail trade, at least for goods manufactured in India. Implementing a cohesive national policy is essential in this regard,'' the economist mentioned.
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