Latest news with #StateoftheEconomy
Business Recorder
5 days ago
- Business
- Business Recorder
FDI in Pakistan: Optimism amid constraints
Foreign Direct Investment (FDI) has long been a weak link in Pakistan's economic progress. While there has been no substantial improvement in inflows—annual FDI has remained below $2 billion on average—the State Bank of Pakistan's latest State of the Economy report presents a cautiously optimistic view of FDI trends and prospects. According to the central bank, the current FDI landscape and outlook reflect several key dynamics. The report notes significant investment inflows primarily in sectors such as power (hydel and coal), financial services (including microfinance and investment banks), and oil and gas exploration. However, it also acknowledges that these inflows remain heavily concentrated in traditional sectors, with China continuing to play a significant role—particularly in power generation infrastructure and consumer electronics. While the report highlights that major FDI sources include the Middle East, the UK, the US, and Hong Kong—targeting long-term growth sectors like renewable energy and consumer electronics manufacturing—monthly SBP data does not reflect noticeable spikes in overall inflows. Similarly, while the ICT sector is portrayed as a bright spot due to consistent growth and supportive policy measures, FDI into the sector remains small in real terms. Despite these positive developments, challenges persist. The central bank's half-yearly report underlines the need to diversify FDI beyond conventional sectors. It also points to increasing profit repatriation, which places pressure on the financial account, and highlights that official loan disbursements continue to fall short of commitments—further constraining financial inflows. The central bank links sustainable FDI inflows to long-term improvements in competitiveness, particularly those rooted in productivity, policy stability, and institutional quality – something that has been missing in Pakistan. The document advocates a strategic shift from short-term cost advantages to deeper reforms that create an enabling environment for high-quality, diversified, and durable foreign investment. Looking ahead, the SBP maintains a cautiously optimistic stance on FDI. The ICT sector, buoyed by ongoing support from the government and central bank, is expected to maintain its growth trajectory, contributing to export expansion and attracting global investment. Infrastructure development, especially in renewable energy and power transmission, is likely to continue drawing interest from strategic partners such as China. Moreover, improved macroeconomic stability, declining global interest rates, and more favourable global financial conditions could support greater FDI inflows in the short to medium term. That said, risks tied to global economic trends, domestic political stability, policy continuity, and external debt repayment obligations remain significant. In a recent engagement with international investors, the Governor of the State Bank presented a more upbeat picture of Pakistan's macroeconomic outlook. Investors were told that the outlook for FDI is positive, driven by prudent monetary policy, consistent fiscal consolidation, and improving inflation dynamics. The Governor emphasized the strengthening of foreign exchange reserves without reliance on additional external debt—highlighting this as a key marker of sustainable fiscal management. He also pointed to the gradual recovery in GDP growth and recent upgrades by international credit rating agencies as signs of renewed investor confidence. With a continued focus on structural reforms aimed at fostering long-term economic stability, the Governor portrayed a scenario in which ongoing economic improvements, stronger external accounts, reduced debt burdens, and international recognition enhance Pakistan's prospects for attracting and sustaining FDI in the near to medium term. However, a closer comparison of the SBP report and the Governor's remarks reveals notable some differences in tone and emphasis. While the Governor's statement highlights the build-up of external buffers independent of external debt—casting debt sustainability in a favourable light—the SBP report takes a more measured view. It directly addresses the financial pressures arising from reduced official inflows and significant external debt repayment obligations. Although these perspectives are not inherently contradictory, they differ in tone and depth. The SBP report presents a balanced assessment, acknowledging both strengths and vulnerabilities, while the Governor's remarks are more optimistic, focusing on macroeconomic gains and reform momentum.
Hans India
23-05-2025
- Business
- Hans India
India emerging as connector country: RBI
New Delhi In the midst of global trade realignments and industrial policy shifts, India is increasingly positioned to function as a 'connector country' that can become a key intermediary in sectors such as technology, digital services, and pharmaceuticals, according to the Reserve Bank of India (RBI). Indian economy continues to be ring-fenced by stability encompassing monetary, financial and political stability; policy consistency and certainty; congenial business environment; and strong macroeconomic fundamentals along with a policy ecosystem that is transparent, rule-based, and forward-looking, said the 'State of the Economy' report by the central bank. The global growth continues to face headwinds with persistent trade frictions, heightened policy uncertainty, and weak consumer sentiment weighing on the outlook. Despite this, the Indian economy is exhibiting resilience even after high trade and tariff-related concerns, RBI said. Persistent trade frictions, heightened policy uncertainty, and weak consumer sentiment continue to create headwinds for global growth.
&w=3840&q=100)
Business Standard
22-05-2025
- Business
- Business Standard
Net FDI into India falls to $0.4 bn in FY25 amid repatriation surge
Net foreign direct investment (FDI) in India crashed by more than 96 per cent to $0.4 billion in FY25 from $10.1 billion a year ago due to higher repatriation and outward flow. Net FDI was $ 28.0 billion in FY23. The decline in FY25 is 'a sign of a mature market where foreign investors can enter and exit smoothly, which reflects positively on the Indian economy,' said the State of the Economy report by the Reserve Bank of India (RBI) in its monthly bulletin (May 2025). Gross FDI remained elevated in FY25, with 13.7 per cent year-on-year (Y-o-Y) growth to clock $81 billion worth of flows. It was $ 71.3 billion in (FY24) and 71.4 in FY23, according to RBI data. More than 60 per cent of gross FDI inflows in FY25 were in manufacturing, financial services, electricity and other energy, and communication services sectors. Singapore, Mauritius, the UAE, the Netherlands, and the United States (US) accounted for more than 75 per cent of the flows, said the report. Repatriation/disinvestment by those who made direct investments in India increased to $51.5 billion in FY25 from $ 44.5 billion in FY24 and $ 29.3 billion in FY23. Overseas investments made by Indian companies (outward FDI) increased to $ 29.2 billion in FY25 from $16.7 billion a year ago and $14 billion in FY23. Singapore, the US, United Arab Emirates, Mauritius and The Netherlands together accounted for more than half of the rise in outward FDI. Financial, banking and insurance services, followed by manufacturing; wholesale, retail trade, restaurants and hotels accounted for more than 90 per cent of outward FDI, said the report.
The Hindu
22-05-2025
- Business
- The Hindu
India stands well-positioned to navigate ongoing global headwinds: RBI Bulletin
Amidst global uncertainty when the global economic outlook remains clouded amidst shifting policy landscapes and lingering vulnerabilities the outlook for India is one of 'cautious optimism' said Reserve Bank of India official in the May edition of RBI Bulletin. 'According to IMF projections of April 2025, India is projected to remain the fastest growing major economy in 2025 and is likely to surpass Japan this year to become the world's fourth largest economy,' they said in the State of the Economy article. 'Inflation pressure has eased significantly and is poised for a durable alignment with the target in 2025-26. The prospects of bumper rabi harvest and the outlook of an above normal monsoon would further strengthen rural consumption and is also likely to keep food inflation in check. Consumers and businesses remain confident, supportive for a strengthening of economic activity,' they stated. They emphasised that the Indian economy continued to be ring-fenced by stability encompassing monetary, financial and political stability; policy consistency and certainty; congenial business environment; and strong macroeconomic fundamentals along with a policy ecosystem that is transparent, rule-based, and forward-looking. 'In the midst of global trade realignments and industrial policy shifts, India is increasingly positioned to function as a 'connector country' that can become a key intermediary in sectors such as technology, digital services and pharmaceuticals,' they stated. In this scenario, the recent completion of free trade agreement with UK points to a strengthening of bilateral trade linkages, they pointed out. 'Going forward, notwithstanding the daunting challenges in the horizon, India stands well-positioned to navigate the ongoing global headwinds with confidence, ready to harness emerging opportunities and consolidate its role as a key driver of global growth,' they stated. They said during the month the Indian rupee moved within a narrow range and exhibited lower volatility compared to peer economies. But the escalation of tensions between India and Pakistan rendered financial markets 'volatile with India VIX seeing a substantial jump', they stated. 'Domestic financial markets sentiments witnessed a turnaround thereafter amidst easing India-Pakistan tensions, an improvement in the global trade scenario, and softer domestic inflation,' the officials wrote in the article. 'Amidst uncertainties on global capital flows, it is noteworthy that domestic institutional investors (DIls) have surpassed FPIs in ownership of Nifty-500 companies in March 2025. This marks a structural shift in Indian equity markets as DIls, including mutual funds and insurance companies, increasingly offset the volatility caused by FPIs, with retail and systematic investment plan (SIP) flows providing a steady long-term investment base,' they pointed out. The measures undertaken by the Reserve Bank since January 2025 have significantly eased liquidity conditions and calmed financial markets, they highlighted.
Time of India
22-05-2025
- Business
- Time of India
India to be a connector country: RBI
MUMBAI: Amid global trade realignments and industrial policy shifts, India is increasingly positioned to function as a " connector country " that can become a key intermediary in sectors such as technology, digital services and pharmaceuticals, said RBI's latest bulletin on Wednesday. In this scenario, the recent completion of free trade agreement with UK points to a strengthening of bilateral trade linkages, said an article on the 'State of the Economy' published in May Bulletin. "Going forward, notwithstanding the daunting challenges in horizon, India stands well-positioned to navigate ongoing global headwinds with confidence, ready to harness emerging opportunities and consolidate its role as a key driver of global growth.". It said persistent trade frictions, heightened policy uncertainty, and weak consumer sentiment continue to create headwinds for global growth. Amid these challenges, the Indian economy exhibited resilience, the article said. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
