China's $1.4 trillion stimulus falling short could impact FPI inflows into India

The Chinese government has approved a 10-trillion yuan or USD 1.4 trillion package aimed at giving a boost to a slowing domestic economy and bailing out local governments. The stimulus comes just two days after Donald Trump won the US Presidency following a campaign where he proposed tariffs as high as 60 per cent on goods imports from China.

The analysts anticipate the eventual scale of China’s fiscal stimulus package to reach 2-3 percent of GDP annually over the next several years. This could make other markets, India included, less appealing to FPIs and could have an impact on the Indian stock and currency markets.

Though China’s massive $1.4 trillion economic stimulus is intended to revive slowing growth, but it has raised questions as it struggles to meet expectations amid a tough global economic landscape.

India, known for its stable and promising growth trajectory, could benefit if investors turn away from China. With policies supporting robust growth in technology, infrastructure, and manufacturing, India offers an appealing alternative to FPIs seeking strong returns amid global uncertainties. However, a significant shift in capital inflows is uncertain and depends on how China navigates its economic challenges and how India positions itself as a favorable investment destination in the wake of these global shifts.