New Delhi: India’s growing integration with the global economy has made it an increasingly attractive destination for companies, investors and consumers. But as global capital, technology and manufacturing capacity become more mobile, the country faces a more complex challenge: attracting deeper and more valuable investments rather than simply attracting entry.
That question is also relevant to the recent weakness in Indian equities. While some global markets have continued to perform strongly, Indian stocks have faced pressure from higher US bond yields, rising oil prices, a weaker rupee and relatively expensive valuations. At the same time, markets such as Taiwan and South Korea have benefited from the global artificial intelligence boom, while commodity-exporting economies have gained from higher commodity prices.
The result is a global investment environment in which India remains a strong growth story, but investors have more alternatives than ever before.
Why Indian stocks are under pressure
The recent decline in Indian equities cannot be explained by a single factor.
US bond yields have risen, making dollar-denominated assets more attractive to global investors. Higher oil prices are another concern for India because the country remains heavily dependent on imports to meet its crude oil requirements. A weaker rupee can further increase the domestic cost of imported commodities.
Valuations are another part of the equation. Indian equities have continued to trade at relatively high valuations compared with several other emerging markets. That means investors can find potentially cheaper opportunities elsewhere without necessarily having to give up exposure to global growth.
At the same time, Taiwan and South Korea have been among the major beneficiaries of the global AI investment cycle. Their technology and semiconductor companies have attracted substantial investor attention as demand for AI-related infrastructure, chips and computing capacity has increased.
Commodity exporters, meanwhile, can benefit when oil and other commodity prices rise.
India has its own structural growth story, supported by domestic consumption, infrastructure investment, manufacturing ambitions and a large services economy. But global investors do not assess India in isolation. They compare its potential returns, valuations and risks with opportunities available across the world.
That competition can put pressure on Indian markets even when the country’s underlying economic story remains intact.
Rising US yields complicate the dollar equation
The relationship between US bond yields and the dollar is another important part of the global investment picture.
Under conventional economic thinking, higher US Treasury yields can support the dollar because investors may seek better returns from dollar-denominated assets. However, the relationship is not always straightforward.
The reason behind a rise in yields matters.
If yields are increasing because investors expect stronger economic growth, the development can be interpreted positively. But if yields are rising because markets are worried about government debt, inflation or the sustainability of fiscal policy, the signal can be very different.
Since the April 2025 “Liberation Day” tariffs, movements in US 10-year Treasury yields relative to yields in other countries have not always translated into corresponding strength in the dollar.
This makes it harder for investors to rely on a simple relationship between yields and currency movements.
Another question is where global money is actually flowing. US equities have continued to attract investment, while demand for US government bonds has shown signs of becoming less straightforward.
For investors trying to understand global markets, therefore, simply looking at the direction of Treasury yields may not provide the complete picture.
Foreign carmakers have more ways to enter India
The changing nature of foreign investment is particularly visible in India’s automobile market.
Earlier generations of foreign carmakers had strong incentives to manufacture locally. Importing completely built vehicles into India was expensive because of high duties. Companies such as Hyundai, Honda and Toyota therefore had to establish manufacturing operations, develop local supplier networks and gradually increase localisation.
That model helped create a deeper automotive ecosystem in India.
The situation facing new entrants is different.
Companies can now consider a wider range of strategies depending on their business models, product portfolios and expected sales. They can import completely built vehicles, assemble kits, use existing manufacturing facilities or work with Indian partners.
Companies such as VinFast, Tesla and BYD illustrate this changing landscape, although their individual strategies and levels of localisation differ.
For Indian consumers, the immediate effect could be greater choice. More international brands can enter the market without necessarily having to recreate the entire manufacturing ecosystem from the ground up.
Easier entry does not guarantee deeper investment
The arrival of more foreign carmakers is not necessarily negative for India.
In fact, the ability of companies to enter the market more easily is itself evidence of how much India’s industrial ecosystem has developed. The country now has established component suppliers, manufacturing facilities, engineering capabilities, logistics networks and a large consumer market.
A company entering India can therefore build upon infrastructure and capabilities that previous generations of manufacturers helped create.
The bigger question is what happens after entry.
If a company imports most of its vehicles, the immediate investment and manufacturing impact may be relatively limited compared with a company that builds plants, develops suppliers and increases local sourcing.
New entrants are likely to deepen their manufacturing presence when sales volumes make localisation commercially attractive. That creates a link between the size of the Indian market and the depth of investment companies are willing to make.
For India, the challenge is therefore not simply to become easier to enter. It is to create conditions that encourage companies to keep investing after they enter.
India’s globalisation has changed the competition
India has spent decades becoming more integrated with the global economy.
That integration has brought factories, technology, capital, jobs, products and consumers into closer contact with global markets. It has also helped create the industrial and services ecosystem that makes the country more attractive to multinational companies.
But global integration works in both directions.
Foreign companies have choices about how they enter India. Foreign investors have choices about where they allocate their money. India, in turn, has to compete with other countries for capital, technology, manufacturing capacity and talent.
This is different from an earlier phase of globalisation, when opening up the economy and offering access to a large consumer market could itself be a powerful attraction.
Today, many countries are competing for the same investment.
Vietnam, Indonesia, Mexico and several other economies are seeking manufacturing investments. Financial markets across Asia and other emerging economies are competing for global capital. Countries are also offering incentives to attract semiconductor, electric vehicle, electronics and technology investments.
India’s size gives it a major advantage, but size alone may not determine where the next generation of investment goes.
The question is about value creation
This changes the central question for India.
It is no longer enough to ask whether multinational companies will enter the country or whether foreign investors will buy Indian assets.
The more important questions are how much value companies create in India, how much of their supply chain is developed locally, how much technology and expertise is transferred, how many jobs and capabilities are created, and whether investments become deeper over time.
The same logic applies to financial markets.
India can remain an attractive growth market while still experiencing periods when global investors prefer cheaper valuations elsewhere or markets benefiting more directly from a particular global trend.
That does not necessarily invalidate India’s long-term growth story. It highlights the competitive nature of global capital.
India must compete in a world of choices
India’s transformation has given foreign companies and investors more reasons to consider the country. But the same globalisation that has made India more connected has also created more alternatives.
Investors can choose markets with lower valuations, economies benefiting from the AI cycle or countries gaining from higher commodity prices. Companies can choose whether to build factories, partner with existing manufacturers or import products.
For India, the next stage of global integration will therefore be less about simply attracting companies and more about attracting deeper commitments.
The country already has the market, the workforce, manufacturing ecosystem and growing consumer base to draw global attention. The challenge is to ensure that companies and capital have compelling reasons to stay, expand and create greater value locally.
In that sense, India may be becoming easier to enter. The harder and more important task is making it increasingly attractive to invest deeply.