India-US Trade Deal to Boost FPI Flows and Remove Uncertainty: Economic Affairs Secretary
Economic Affairs Secretary Anuradha Thakur has highlighted that the recent progress in the India-US trade agreement could have significant macroeconomic benefits for India. The primary advantages include the elimination of persistent uncertainty surrounding the deal and a rapid improvement in market sentiment, which plays a crucial role in attracting foreign portfolio investment (FPI) flows.
Removal of Uncertainty a Key Positive
When discussing the broader impact of the trade deal with the United States, Thakur emphasized that the resolution of this long-standing issue represents a major positive development. "This big uncertainty that was going around has changed; there is certainty now," she stated. She clarified that while US tariffs did not cause a dramatic collapse in bilateral trade, the removal of this uncertainty is itself a significant achievement.
Thakur explained, "We did not see the US-India trade suddenly reach a cliff and fall, for whatever reasons, whether there was front-loading of shipments from India or sectoral exemptions. It has not fallen. To that extent, the first part—removal of uncertainty—is a great development."
Market Sentiment and FPI Flows
The Economic Affairs Secretary pointed out that market sentiment is a critical factor influencing FPI flows, and this sentiment has already shown a positive shift following the trade deal announcement. "Sentiment plays such a big role in FPI flows at least, and that has changed. Suddenly there will be a positive sentiment; we've seen it in the past, we'll see it again. Sentiments move very fast and impact investment decisions," she added.
Foreign Investment Confidence Remains Strong
Addressing concerns about India's global impression, Thakur noted that while perceptions have evolved over time, they were not negative. This is reflected in the consistent robustness of foreign direct investment (FDI) inflows into India, even as FPI flows have experienced volatility.
"When I talk to businesses, I realize whether it is four big deals or fifty small deals, they are putting their hard-earned money. They are actually betting on our country," she said. Thakur emphasized that India's large market and growing talent pool continue to attract global investors, who see tangible benefits in committing capital to the country.
Capital Outflows and Economic Fundamentals
On the issue of capital outflows, Thakur reassured that FDI inflows have remained firm, indicating strong investor confidence in India's macroeconomic fundamentals. "They (FDI investors) are actually believing in the country's macroeconomic fundamentals if they are locking in equity in companies," she stated.
This discussion occurs against a backdrop of slowing capital inflows and growing unease over increasing outflows. The Economic Survey 2025-26 had previously identified capital outflows and external uncertainties as potential risk factors for India's economic growth.
Immediate Market Response
The United States announced the removal of punitive tariffs on India late Monday, reducing the headline tariff rate to 18 percent from 50 percent. In response, Indian stock markets surged sharply on Tuesday, with foreign investors returning to purchase Indian equities worth Rs 5,236.28 crore. This marks the highest inflow in over three months, demonstrating the immediate positive impact of the trade deal on market dynamics.
The belated forward movement on the India-US trade agreement is thus poised to deliver multiple macroeconomic benefits, from stabilizing investor sentiment to potentially enhancing foreign investment flows, as outlined by Economic Affairs Secretary Anuradha Thakur.
