Neelkanth Mishra, Executive Director of the World Bank and Chairman of the Unique Identification Authority of India (UIDAI), has clarified that the recent significant outflows of foreign portfolio investment (FPI) from India are primarily a consequence of high interest rates in the United States, rather than a diminished belief in India's economic growth prospects.
In an interaction, Mishra emphasized that he has encountered no investor who disbelieves the India growth story. Instead, the global financial environment, particularly elevated US bond and mortgage yields, makes it challenging for emerging markets like India to attract substantial FPI inflows.
High US Yields Impact Emerging Market Appeal
Mishra pointed out that US 10-year bond yields are currently around 5.3%, with mortgage yields even higher at approximately 7.5%. In such a scenario, the commensurate return required from riskier emerging market assets needs to be considerably higher to justify investment over safer US instruments. This dynamic makes it difficult for FPIs to allocate funds to markets like India, even though emerging markets as a whole have shown resilience and outperformed developed markets this year.
"I haven't found anyone who disbelieves the India growth story," Mishra stated, reinforcing confidence in the nation's macroeconomic fundamentals.
Foreign portfolio investors have withdrawn over Rs 35,000 crore from Indian equities in September alone, contributing to a total outflow of Rs 2.32 lakh crore in 2026. These figures, according to Mishra, reflect the global interest rate environment rather than specific concerns about India's economic trajectory.
India's Position in Global Asset Allocation
Mishra also highlighted that India is not yet widely considered a standalone asset class by many global investors. Instead, it typically receives funding through broader Emerging Markets (EMs) and Asia-focused funds. These funds face their own challenges and allocation issues, further complicating direct flows to India in the current high-yield US environment.
Despite these immediate FPI challenges, Mishra's comments underscore a continued international confidence in India's long-term growth potential, suggesting that flows may resume once global interest rate differentials become more favorable for emerging markets.