FPI Inflows (Indian Economy)
FPI Inflows (Indian Economy)
Why In News:
Joint measures by the Government of India and the Reserve Bank of India (RBI) have resulted in 8 months' worth of FPI (Foreign Portfolio Investor) inflows into government bonds being attracted in just 2 weeks, highlighting the effectiveness of coordinated monetary and fiscal signalling in India's debt markets.
Source: The Indian Express, Page 13, 26 June 2026 - 'Govt, RBI's bond measures pull 8 months of FPI money in 2 weeks'
Foreign Portfolio Investment (FPI) in India
FPI refers to investment by foreign entities in Indian financial securities (stocks, bonds, and other instruments) without the intent of taking management control - unlike FDI.
FPIs are registered with SEBI (Securities and Exchange Board of India).
FPIs in India are regulated by SEBI.
FPI in government securities (G-Secs) is sensitive to: interest rate differentials, currency risk, India's credit rating, global risk appetite, and RBI/government policy signals.
Fully Accessible Route (FAR): RBI's framework (launched 2020) under which certain G-Secs are fully opened to foreign investors without any limit.
RBI's Key Bond Market Tools
Open Market Operations (OMO): RBI buys or sells government securities to manage liquidity and bond yields.
Repo Rate: Rate at which RBI lends to commercial banks - the primary tool for managing inflation and growth.
Market Stabilisation Scheme (MSS): Sterilisation tool to absorb excess liquidity through government securities issuance.
Key Facts for Prelims
FPI vs FDI: FPI is in financial markets and easily reversible ("hot money"); FDI is in real assets and represents a long-term commitment.
Yield and Price Relationship: Bond yield and bond price move in opposite directions - when FPIs buy bonds, prices rise and yields fall.
Current Account Deficit (CAD): India relies on capital flows (FPI, FDI) to finance its CAD; sustained FPI inflows help stabilise the INR.