India's FDI Boon: PLI and China Plus One Strategy Fuel Growth

India's foreign direct inflows are expected to grow due to the 'China plus one' strategy and productive-linked incentive schemes. A report by Jefferies highlights the surge in FDI despite market volatility and high valuations, making India an attractive market for private equity investments.

A recent report by Jefferies emphasizes that India's foreign direct investment (FDI) inflows will continue to rise, driven by the 'China plus one' strategy and production-linked incentive (PLI) schemes. The investment banking firm notes that this long-term trend signifies a positive future for India's manufacturing sector.

The report highlights Apple's decision to move its production facility to India as a significant milestone in attracting foreign investments. Although FDI inflows have been substantial recently, the net investment remains low due to market volatility and profit-taking by foreign investors. Last fiscal year, FDI in gross terms was USD 71 billion, but net terms were only USD 11 billion, the lowest in over a decade.

Jefferies attributes this disparity to market volatility and high valuations, which may deter some foreign investors. However, the report suggests that India's booming market and attractive valuations make it an ideal destination for private equity firms to offload investments. According to National Securities Depository Limited (NSDL) data, net foreign investment in the current calendar year stands at approximately USD 14.6 billion. Despite mixed investor activity, including sales and purchases throughout the year, India's market remains robust.