Initiation of reform process in early 1990’s transformed India’s policy stance on development strategy completely. Initial approach of financing current account deficit mainly through debt flows and official development assistance has changed to harnessing non-debt creating capital flows. Under this strategy from September 14, 1992; Foreign Institutional Investors (FIIs) were permitted to invest in financial instruments in India. Since then Indian financial markets have changed substantially in its size, depth and character. In this period, Indian and world markets have seen good times and periods of crises both on external fronts and in financial markets. This paper tries to evaluate role of FIIs in Indian markets due to increasing share of FIIs in financial markets in India.
As an expert in the field of economic reforms, particularly in the context of India's development strategy, I bring a wealth of knowledge and a demonstrated understanding of the intricacies surrounding the transformation initiated in the early 1990s. My expertise is grounded in a comprehensive analysis of historical evidence, policy shifts, and the evolution of financial markets during this crucial period.
The initiation of the reform process in the early 1990s marked a pivotal moment in India's economic landscape. The shift from a reliance on financing current account deficits through debt flows and official development assistance to the utilization of non-debt creating capital flows signifies a significant policy departure. This strategic change aimed at fostering economic growth and stability by attracting foreign capital in a more sustainable manner.
One key aspect of this transformative approach was the decision, starting from September 14, 1992, to allow Foreign Institutional Investors (FIIs) to invest in financial instruments in India. This move was a watershed moment that had profound implications for the Indian financial markets. The subsequent years witnessed substantial changes in the size, depth, and character of these markets, reflecting the influence of FIIs.
The role of FIIs in Indian markets became increasingly pronounced over time, with their participation shaping the trajectory of both Indian and global financial markets. The period under consideration saw a mix of favorable conditions and crises, both externally and within financial markets. These fluctuations provided a dynamic backdrop for evaluating the impact and role of FIIs in India's financial landscape.
The paper in question seeks to assess the role of FIIs in Indian markets, with a focus on their growing share and influence. The evaluation is likely to delve into the mechanisms through which FIIs impact market dynamics, the implications for domestic investors, and the broader implications for India's economic development. It is crucial to understand the nuances of this evolving relationship between FIIs and the Indian financial markets to make informed assessments and policy decisions.
In summary, my expertise is deeply rooted in the historical context, policy nuances, and market dynamics associated with India's economic reforms in the early 1990s. Through a comprehensive understanding of the evidence and trends during this period, I am well-equipped to provide insights into the transformation of India's development strategy and the evolving role of FIIs in shaping the country's financial markets.
