The Hindu Business Line : US capital outflows fall 66% in July-Sept

Data released by the US on Monday show that capital (re)exports over July-September 2007 were $300 billion below the figure for April-June. US banks accounted for one-third of the drop.

Almost all the rest was due to the subdued activity of ‘US non-banking concerns’.

These figures do not fit well with the October 30 statement of Mr Robert Morse, Managing Director and CEO Citigroup Asia Pacific (Markets and Banking) in New Delhi, that the ‘sub-prime mortgage crisis has primarily been a US phenomenon and its impact on Asia has been and will be limited’.

No doubt so far as India is concerned its foreign currency reserves increased more rapidly after the sub-prime mortgage crisis than before it, by $34 billion over July-September (and another $25 billion between October and the first week of December), compared to $15 billion in April-June.

Though FII net purchases on the stock market, too, have been buoyant, it is necessary to take on board the RBI’s December 13 statement asking banks to ‘unwind’ payment guarantees given by them to stock exchanges on behalf of mutual funds and FIIs.

The RBI Balance of Payments data for the second quarter of fiscal 2007/08, due to be released shortly, will improve our understanding of what happened yesterday.

But foreign investors may not be the most reliable source for predictions about what will happen tomorrow.

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