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Cautious investors, sluggish stock market hit FDI: report
Tuesday, 03 December 2002, 20:30 IST
NEW DELHI: Cautious investors coupled with the sluggish performance of India's stock market resulted in higher outflows of foreign funds and lower inflows of foreign investment in the first five months of this fiscal.
A mid-year economic review by the finance ministry said that during April-August, foreign direct investment (FDI) inflows totalled $1,358 million, 7.55 percent lower than the $1,469 million in the corresponding period last year.
"Weak investor sentiment and the sluggish performance of the Indian stock markets resulted in a net outflow of $248 million through the foreign institutional investors (FII) route in the first five months of the current financial year, relative to the large inflows of $873 million in the corresponding period in the previous year," said the review, presented in Parliament Tuesday.
This is the first time the finance ministry has reviewed the country's economic performance more than once a year before the annual presentation of the budget.
The report stated that based on the recommendations of an expert panel, a ministerial group is mulling raising sectoral caps and easing the approval mechanism for FDI.
Global experts have in a report to the World Bank painted an optimistic picture of India being able to buck the reversal trend to attract good investment.
The finance ministry report noted that foreign investment flows to India during April-August were $1,130 million, a dip of 60.20 percent compared to $2,839 million in the corresponding five months of the previous year.
On the foreign exchange reserves front, India witnessed a high accretion of almost $12 billion, growing from $54.1 billion at the end of the previous fiscal at March end, to $66 billion on November 15.
This was in no small measure due to higher remittances by NRIs, who were attracted by deposit schemes becoming fully convertible, the report said.
From April 1, deposit schemes for NRIs that did not offer full convertibility were discontinued.
"Transition to full convertibility encourage heavy inflows of $2,401 million under the non-resident (external) rupee account, while balances under the non-resident (non-repatriable) rupee deposits decreased by $1,528 million in April-August 2002," the report stated.
During 2001-02, India had pre-paid $102.08 million of corporate external debt and a further $600.74 million in the current year up to September, the report said.
Combined with a soft interest rate regime both in the international and domestic markets, India is comfortably placed on the foreign reserve front, it said.
Source: IANS
Source: IANS