Date: 17th September, 2013 Gloria Ganguly
FDI rose 58% on a net basis to $8.7 billion during April-July, despite a moderation in the pace of inflows from abroad.
On a gross basis, inflows rose 9.2% to $10.7 billion as companies pumped in over $7.3 billion as equity capital, while $2.7 billion was reinvested earnings. Of this around $2.2 billion was repatriated or disinvested in India by foreign companies. As an outcome, inflows were up a little over 6% at $8.5 billion during the first 4 months of the financial year, the latest data released by RBI in the monthly bulletin showed.
What boosted the net flows was the fact that repatriation and disinvestment by Indian companies rose to $3.1 billion during April-July 2013, compared to $1.3 billion in the corresponding period last year. Adding to that a moderation in investment abroad, FDI outflows of $2.5 billion also turned into inflows. What contributed to the sharp hitch is unclear but analysts believe that Indian companies have become more cautious in recent months as several of them are saddled with high debt burden and are looking to sell some of their assets abroad.
Apart from FDI, the other good news for the government was a reversal in the flow of non-resident deposits that witnessed the first accretion to the stock during the current fiscal year. Since March 2013 the stock of deposits by expatriates had been falling every month. While bankers believed that several NRIs were pulling money from India to avoid an erosion of their base on account of the rupee depreciation. This trend seems to have been turned after a series of steps announced by the government. More steps had come in April and bankers are expecting a sharper turnaround. During April-July 2013, however, there was a 9.5% decline in non-resident deposit inflows to $6.7 billion.