Moody's Investors Service describing India’s focus on Foreign direct Investment (FDI) as credit positive has said that the improvement in the external situation will also provide support to the rupee. Moody's Investors' Senior VP Rahul Ghosh has said that improvement in India's external accounts in recent quarters, coupled with the country's growth out performance against major emerging markets, should provide a measure of support to capital inflows.and, by extension, the rupee.
In the last month, the government has significantly liberalized the foreign direct investment (FDI) regime, putting most of the sectors on the automatic route. Ghosh further said that “If recent changes in the policy successfully shift the composition of foreign capital inflows towards foreign direct investment, it would lower capital account volatility, a credit positive.”
In the mid-year economic analysis 2015-16, the government said India's external position appears robust, with the current account deficit (CAD) at a comfortable 1.2 per cent of GDP. The net FDI inflows have grown to over $17 billion in April- September of the current fiscal from $15.8 billion in the same period last fiscal 2014-15. This is noteworthy against the background of uncertainty in other capital inflows.