Make-in-India launched by the Government of India, in 2014 is an ambitious initiative to encourage multi-national, as well as national companies to manufacture their products in India. The basic aim launching the initiative was India becoming a preferred top destination globally for Foreign Direct Investment (FDI). Importantly, the net FDI inflows into India hit an all-time high in January 2016, at $3.0 billion on a 12-month moving average basis.
Currently, India’s current account deficit (CAD) is more than covered by its FDI inflows. Also with commodities prices being low - Gold imports on decline, crude oil prices being low are two positive triggers working for Indian economy and more investments getting parked in India via the FDI route, the CAD does not remain a major concern for India and this may augur well for Indian rupee as it may see some strength from here.
The Global rating agency – Moody’s, has recently praised that Indian Prime Minister Narendra Modi ‘Make-in-India’ is working well, which has provided the Modi-led government enough reasons to cheer! Moody an essential component in the global capital markets, believes with ‘Make-in-India’ kind of initiatives showing some results, the FDI investments can grow from here and these investments will help India strengthen its Balance Sheet.
According to Marie Diron, a Moody’s Senior Vice President for the Sovereign Risk Group, “The rise in FDI points to stronger investor interest in India on the back of robust economic growth…FDI inflows are likely to climb further in response to government measures, such as efforts to liberalize foreign investment limits in several sectors and the ‘Make in India’ initiative”.
This trend of increasing FDI investments in India has places India in a stronger position to face contingent external shocks.
The rating agency also opined that due to rising FDI investments in India, the nation’s dependency on the external financing will reduce subsequently.
However, Moody’s also cautions on various global factors that may also lead to renewed widening of the CAD. “The prospect of subdued global economic activity — in particular in the Gulf states, the origin of more than half of remittances to India — may lead to a significant and prolonged weakening of remittance inflows. This development is likely to prevent India’s current account from returning to balance and could lead to its renewed widening”, cautions the global rating agency.
'This is the Step of a Lion': PM Narendra Modi has once famously commented on his Make-in-India Campaign, the recent results and the global accreditations are proving him right and providing him the much appreciated PAT. Importantly, the logo is a striding lion made of cogs, symbolising manufacturing, strength and national pride.