Possible Shift in FDI Would Benefit U.S. Companies
Kegler Brown Global Business News May 22, 2014
Governor of the Reserve Bank of India, Raghuram Rajan, is placed in a difficult predicament. When he started his job he faced the issue of shrinking foreign exchange reserves. The Bank is tasked with the responsibility of monitoring the exchange control regulations in India that lead to exports out of the country. Now, since Mr. Narendra Modi has secured India’s top job, both domestic and overseas investors are looking at changes to the foreign direct investment (FDI) climate with his win.
And what does that mean for Rajan? It means that an influx of money as foreign direct investment challenges Rajan's goal of controlling the current inflation status of the country.
Bottom line: somebody's problem is somebody's gain. This surge of foreign direct investment could become a problem for the Bank and become expensive due to a likely depreciation of the rupee. However, this can be an advantage for U.S. companies looking for investments as exports to India would be more profitable and opportunities plenty to invest in key sectors like telecom, retail, defense, aviation and insurance that will likely be liberalized for FDI after the elections under the new administration.
U.S. companies should closely monitor the evolving business market and opportunities as the elections are completed with one party, the BJP, getting a thumping majority at the Parliament, which will lead to changes by the Indian government that cannot be ignored by those looking at the Indian market for long-term gains.