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FII money in the hot category
By agencies
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Tuesday, 06 June 2006, 19:30 IST
NEW DELHI: For the first time Reserve Bank of India has defined what it means by Volatility in foreign capital flow with respect to India. It said that 77 percent of the net annual foreign capital inflow into the country was Volatile for the year 2005-06.
The RBI volatile foreign capital inflows compromise portfolio investment and short-term trade credit. The share of such inflows in the net total foreign capital inflows has been 76.3 percent in 2003-04. In 2004-05 the flow has eased to 40.9 percent. Now it has picked up steam as the stock markets have gathered momentum.
In the current year, the net FII inflow has been $2.39 billion. The government has a large room for comfort, as the total foreign exchange reserves of the country.
In recent years, the countrys stock of foreign exchange has shot up largely through the surge in FII investment. It said that to sterilize the impact of the flow of foreign exchange in to the country in 2005-06 RBI had to spend $183 million or about 0.2 percent of the total fiscal deposit.