Contrary to what many may be thinking, India is not facing a wholesale flight of foreign capital. Its foreign direct investment prospects remain relatively firm, while a series of temporary measures have brought large foreign-currency inflows into the country.
But portfolio investors have been much less convinced. The September Monthly Economic Review of the Union Finance Ministry has noted how portfolio investment flows remain volatile. The deeper issue is that India is no longer competing only with other emerging markets for capital. It is competing with the United States, East Asia and increasingly with developed economies for investment in the technologies and industries expected to drive the next growth cycle.
