The Hindu Business Line : Portfolio investments see sharp rise in April-Sept

Mumbai, Dec. 31 Portfolio investments saw a sharp increase in April-September 2007 and comprised a major chunk of the total foreign investment, according to the Balance of Payment data released by the Reserve Bank of India on Monday. There was also an increase in the external commercial borrowings (ECB), while net foreign direct investment saw a decrease during the period.

The total foreign investment stood at $22.2 billion, against $6.1 billion during April-September 2006. The portfolio investment comprised $18.334 billion during April-September 2007-08, a sharp increase from $1.644 billion during the corresponding period last year.

FDI flow

There was both foreign direct investment (FDI) into India, as well as outward FDI. The inflows under FDI were at $9.9 billion ($7.3 billion in April-September 2006). “FDI investment accelerated on the strength of sustained domestic activity and a positive investment climate with inflows channelling into manufacturing, business, and computer services,” said the data.

Outward FDI increased at $6 billion ($2.8 billion in April-September 2006), reflecting the preference of the Indian companies for global expansion in terms of markets and resources. Thus, net FDI inflows were lower at $3.9 billion against $4.5 billion.

Net ECBs at $10.6 billion during April-September 2007 ($5.7 billion during April-September 2006) were enabled by lower interest rates on external commercial borrowings and rising financing requirements for domestic capacity expansion, the data said.

There was a net outflow on account of non-resident Indian (NRI) deposits during April-September 2007 as the interest rates on such deposits have been reduced in the recent period. Net short-term trade credit was at $5.7 billion (inclusive of suppliers’ credit up to 180 days) for the period under consideration.

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