Indian External Sector

By: EconomyWatch Content   Date: 5 April 2010

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 India in 2009 witnessed a surge of FIIs hedging on the nation’s growth prospects, and bringing in over $17.46 billion in domestic equities, according to the Securities and Exchange Board of India (SEBI) data as of December 31, 2009. This is the highest ever inflow of rupees in the country in a single year, breaking the previous high of $15.9 billion in 2007. The Bombay Stock Exchange’s benchmark, the Sensex, gained more than 70% in 2009, after falling by more than 90% in 2008. India’s share of the global FDI increased from 0.78% in 2005 to 2.45% in 2008. India’s foreign exchange reserves stood at $278.7 billion as of February 5, 2010, according to the Reserve Bank of India (RBI), in its weekly statistical supplement. India’s gold reserves also increased with the RBI purchasing 200 mt of gold for $6.7 billion. The gold reserves amount to 6.1% of the nation’s total reserves. As of February 5, 2010, the country’s gold reserves were valued at $18.06 billion, according to the RBI’s weekly statistical supplement.

 

Capital Inflows in 2009-2010

The net capital inflows into the Indian economy in 2010 are expected to be $50 billion. According to the RBI, gross capital inflows to India during April-September 2009 amounted to $175.3 billion, as compared to $184.4 billion in April-September 2008. Net capital flows at $29.6 billion in April-September 2009 remained higher than the $12.0 billion in April-September 2008.

 

Foreign Direct Investments (FDI)

FDI inflows for the period April-September 2009 was at $19.38 billion. FDI inflows for November 2009 were $1.74 billion, an increase of almost 60% over the $1.08 billion figure in November 2008. The FDI equity inflows grew from 0.75% in 2005-06 to 2.5% in 2008-09. According to the RBI, the net FDI flows stood at $7.1 billion in Q2 2009-10, up from $4.9 billion in Q2 2008-09. The net inward FDI remained at $11.3 billion during Q2 2009-10, up from $8.8 billion during Q2 2008-09. The net outward FDI amounted to $4.2 billion in Q2 2009-10, up from $3.9 billion in Q2 2008-09. FDI for December 2009 grew to $1.54 billion, an increase of 13.2% over the December 2008 level of $1.36 billion. 

Exports

India’s exports registered growth of 11.5% in January 2010 to $14.34 billion, from $12.86 billion a year earlier. The areas that posted growth included commodities such as tea, coffee, basmati rice, agricultural products and sectors such as gems and jewelry, drugs and petroleum products and plastics. Petroleum exports reached $2.4 billion in November 2009, up from $1.3 billion in November 2008. Gold and jewelry exports reached $2.15 billion in November 2009, up from $1.6 billion in November 2008. According to the Ministry of Commerce and Industry, the Special Economic Zones (SEZs) registered impressive growth in export, investment and employment generation. 

The exports from the SEZs for the Q1, Q2 and Q3 2009 totaled $32.42 billion, up from $14.23 billion in the same period in 2008. SEZ exports during April-December 2009 grew by 127% to $32 billion YOY.

 

External Sector

India’s balance of payments surplus in July-September 2009 was $9.42 million, up from $4.7 billion during the same period in 2008. According to the RBI, India posted a surplus of $115 million in Q2 2009. The trade deficit remained lower at $58.82 billion during April-September 2009, down from $64.4 billion in April-September 2008. The remittances from Indians living abroad increased to $27.5 billion in April-September 2009, up from $26.4 billion in April-September 2008.

 


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