According to a report by The Indian Express on June 2, the era of abundant cheap international capital may be coming to an end, as foreign capital continues to flow out of India. During the period when international capital was cheap and readily available, India— as an emerging market— had benefited greatly as capital sought high returns. Net capital inflows into India surged from $8.3 billion in fiscal year 1998–1999 to a peak of $107.9 billion in fiscal year 2007–2008, and remained at an average of $67.3 billion per year from fiscal year 2009–2010 to 2023–2024. However, rising inflation and high debt levels are now forcing major economies to raise interest rates, bringing the era of cheap international capital to a close.
For India, this shift has already had significant consequences: over the past six fiscal years since 2020–21, foreign portfolio investment (FPI) has shown net outflows in five of them. The fiscal year 2024–25 has become a turning point—net inflows fell to just $18 billion, while the first nine months of fiscal year 2025–26 recorded a net outflow of $580 million. Currently, India's 10-year government bond yield stands at around 7%, narrowing the yield spread with the U.S. 4.5% yield from historically over 4 percentage points down to just 2.5 percentage points. When factoring in the depreciation of the Indian rupee, the country’s attractiveness further diminishes.
Analysts suggest that future foreign capital inflows into India will depend increasingly on India’s own GDP growth prospects and corporate earnings performance, rather than being driven by the availability of cheap international funds.
Original article: toutiao.com/article/1867203383022592/
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