India is emerging as a preferred destination for global investments. The Indian government keeps working to develop the country to ensure that India remains an investor-friendly destination. Foreign investors typically consider India mainly because of its stability, whether it’s inflation, fiscal growth, growing demographics, huge e-commerce market, or technological advancement. The Indian stock market has risen by 5% recently in the months of October 2022 and November 2022.
Why Foreign Investors Should Invest In India
Here are the facts making India one of the world’s fastest-growing economies with global competitiveness and attracting global investors:
Despite the economic slowdown due to the pandemic and other world crises, India has recorded a remarkable growth rate. India attracted the highest-ever foreign direct investment (FDI) inflow of $83.57 billion during FY 2021-22.
Economy Growth Rate:
India’s real Gross Domestic Product (GDP) is projected to grow at 6.9% in FY 2022-23, making it one of the fastest growing economies in the world during the year. Investors open demat accounts online to benefit from such a growing economy.
The Indian government has made the FDI policy more transparent to attract more investors. Most of the economic segments are unrestricted to FDI. As per recent reforms, Coal Mining, Digital Media, Civil Aviation, Insurance, Telecom, and various sectors are open for direct investments. India is currently at the 63rd position in the World Bank’s Ease of Doing Business Ranking 2020.
Largest Youth Population:
India is home to the world’s largest youth population. India’s largest-ever youth population can participate in this rising economic growth.
Goods and Services Tax (GST) is the biggest tax reform after independence that has integrated various indirect taxes, making the tax system more efficient in the country. With an efficient taxation system, the Indian government is ready to spend more on Capital Expenditure (CAPEX) which will further boost economic growth.
More than 7,000 schemes costing Rs. 111 Lakh Crore are going on across different sectors, including Energy, Urban, Railways, and Roads. It is anticipated that 42% of the population in India would be urbanised positively by 2030.
Considering such facts and growth prospects, more institutional investors and NRIs are heading towards India for significant investments. Investors need a demat account to hold their financial assets electronically. Demat account maintenance charges vary with different brokers.
Ways to Invest in the Indian Stock Market
Foreign Portfolio Investors (FPIs) and non-resident Indians (NRIs)/ Overseas Citizens of India (OCIs) can make investments in India. Under the automatic route, NRIs do not require any approval from the Indian government to invest in India.
- Foreign individuals with a high net worth (minimum of $50 million) can register with the SEBI as FIIs (Foreign Institutional Investors).
- Foreign investors can consider investing in India-specific funds or India-focused ETFs in the US itself.
Portfolio Investment Scheme (PIS)
The SEBI permits NRIs, PIOs, and FIIs to trade equities in the Indian stock market with the PIS account. Foreign investors can invest in listed companies on a repatriation basis.
Under the PIS, foreign investors can open either an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account. Then, there is the need for a demat account to store securities digitally with a SEBI-registered brokerage firm. A demat account is linked to the investor’s PIS account. Investors need to provide the name of their SEBI-registered broker to the bank to open a PIS account. It will issue a PIS permission letter that must be submitted to the stockbroker to open a demat account.
The broker needs foreign investors to complete the Foreign Account Tax Compliance Act (FATCA) declaration formalities while opening a demat account.
Thus, technological advancements and global competitiveness make foreign investors focus on stock market investments in India. NRIs can open NRO or NRE demat accounts with reputable stockbrokers to employ their funds earned in India or outside India and make the most out of it over time.