At the end of January 2008, soon after the meltdown began, the market value of the $77 billion that FIIs had brought in was $218 billion, thanks to related increases in share prices and the rupee (up 500 per cent and 20 per cent respectively since April 2003, when the surge began).

No figures are available for repatriated profits. But being outflows of Investment Income on the Current Account, they do not get netted from capital inflows. Adjusting for outflows, one would find that FIIs had less money on the table.

But even ignoring repatriated profits, it turns out that after FIIs had pulled out $26 billion from India between February 2008 and March 2009 — one-third of the money they had earlier brought in — they still had $77 billion in hand (despite the 45 per cent and 23 per cent fall in the Sensex and the rupee respectively).

The point is that, thanks to the abundant availability of head-room, FIIs are not in any sense locked in. At the end of April 2011, assets under management, at $249 billion, were more than twice as large as the cumulative inflows of $113 billion.

Large withdrawals are possible, for redeployment, without any cash loss.

FIIs may not actually make any withdrawals. But if they want to they can.

Published on June 26, 2011