Will foreign investors return to India now? Hopes have risen after the US deal was finalized; if this happens, the stock market will rise further.

News Topical, Digital Desk : S Mahendra Dev, Chairman of the Economic Advisory Council to the Prime Minister (EAC-PM), said on Tuesday that the India-US trade deal will boost foreign direct investment (FDI) as well as portfolio investment in the country, which will have a positive impact on the value of the rupee. India and the US agreed on a trade deal under which the US will reduce retaliatory tariffs on Indian goods to 18 per cent, which is lower than countries like China, Bangladesh and Vietnam.

"A huge deal for India"

US President Donald Trump announced the trade deal on Monday after a phone conversation with Prime Minister Narendra Modi. Dev said the trade deal announcement is a big deal for India in many ways as it will benefit some labor-intensive manufacturing sectors like textiles and gems and jewellery.
The Trump administration had imposed a 50 percent tariff, along with a 25 percent penalty, on the purchase of Russian oil, which affected India's exports to the US.

Tariff is lower than many countries including Vietnam

Dev said the 18 percent tariff is lower than many countries, including Bangladesh, Vietnam, China, and Brazil. "We will benefit from the 18 percent tariff now," he said. "And I expect India's exports to the US to increase. We have free trade agreements (FTAs) with the European Union and the UK, and with many other countries. So our exports will increase even more. This will also have an impact on growth. Our economic growth will be much higher than before."

FDI and FII flows are expected to increase.

Stating that net FDI and FII flows were being impacted due to uncertainties and currency depreciation, Dev said that with the India-US trade deal, it is expected that this situation will reverse, which will provide support to the domestic currency.
"I believe that after this announcement, the uncertainty surrounding the deal will reduce and this is expected to increase FDI and FII flows into the stock market," Dev said, adding that this will also have a positive impact on the rupee.

Experts believe that if FDI and FII invest in India and the rupee strengthens, it can have a positive impact on the stock market.

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