The Core Report #727 Why Foreign Portfolio Inflows Could Restart Soon
Nov 16, 2025
Paul Gruenwald, Global Chief Economist at S&P Global Ratings, and Nikhil Narendran, a Partner at Trilegal, delve into pressing economic themes. They explore why foreign portfolio inflows might soon resurge, driven by GDP valuation and investment dynamics. Gruenwald shares insights on how data centers are boosting US GDP growth while masking broader economic weaknesses. Narendran discusses India's new Digital Personal Data Protection Act, detailing compliance challenges for companies and the importance of consumer data rights.
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What Drives FPI Cycles
- Foreign portfolio inflows into India closely track nominal GDP growth and relative valuation versus emerging markets.
- FPIs return when India's nominal growth is robust or when its price-to-earnings is cheap versus peers.
Tariff Rollbacks Respond To Affordability Pain
- Trump rolled back tariffs on many food items as inflation and voter affordability concerns rose.
- Tariff rollbacks aim first at areas where political fallout is largest, like groceries.
Tariffs Caused Front-Loading Not Collapse
- Tariff announcements caused front-loading and inventory build-ups, producing short-term import surges.
- Actual tariff effects were smaller than feared due to lower negotiated rates and limited retaliation.