GBP/INR is bullish in early trading on Thursday. The pair has gained 0.13% as of 6:23 AM UTC, to 92.830. It has recovered part of the Tuesday losses, but there is a long way until that session’s peak at 93.314. This is the highest level since early March of this year.
India is experiencing an economic slowdown. Some analysts were predicting a decline in the gross domestic product (GDP) growth to below 5% for the quarter that ended September. In light of this, the government wants to encourage foreign companies to build factories on its territory. Yesterday, Bloomberg reported that India was planning to provide 324 foreign companies with incentives to attract them amid the ongoing trade war between the US and China. This included giants like automaker Tesla and drugmaker GlaxoSmithKline.
The Indian government wants to provide manufacturers with land and other forms of support, like power, water, and road access, to convince them set up factories on its territory. The draft of the proposal document was prepared by the Department for Promotion of Industry and Internal Trade and Invest India.
Currently, companies and investors seeking alternatives to China would rather choose Malaysia or Vietnam instead of India, given the country’s strict land acquisition rules and labor legislation. India hopes that this proposal would attract foreign companies, which would eventually contribute to its economic growth. Prime Minister Narendra Modi’s goal is to double the GDP to $5 trillion by 2025.
However, if the plan succeeds indeed, we might see the impact at a later date, but the rupee is now under pressure on fundamentals with immediate effect. The Indian currency is weakening amid increased pessimism around the trade deal between the US and China. People close to the White House told media that the signing of the “phase one” trade deal between the two countries might be delayed to next year, as China wants more categorical tariff rollbacks, while Trump has heightened demands for the US.
Besides, investors’ sentiment worsened after both chambers of the US Congress passed a bill to support Hong Kong pro-democracy protesters, a legislation that Beijing condemns.