Foreign investors flee stocks, but FDI into India jumps 43%
What's the story
India witnessed a significant increase in net foreign direct investment (FDI) inflows during the April-August period. According to the Reserve Bank of India's October bulletin, net FDI inflows surged by 43.3% to $13.79 billion, up from $9.62 billion in the same period last year. The growth was mainly driven by robust FDI and an increase in non-resident deposits due to FCNR(B) swap measures, despite continued net outflows from foreign portfolio investors (FPIs).
Investment growth
Total net foreign investment inflows rise 65%
The increase in net FDI has also led to a rise in total net foreign investment inflows. These inflows have jumped 65% to $10.08 billion from $6.10 billion last year.
The RBI bulletin noted that "capital flows improved, supported by sustained foreign direct investment (FDI) inflows and a surge in non-resident deposits following the FCNR(B) swap measures."
However, it added that "Foreign portfolio investment (FPI) flows, however, remained volatile."
Monthly trends
Net FDI moderated to $3.32 billion in August
In August, net FDI moderated to $3.32 billion from $7.34 billion in July. This was, however, an increase from the $103 million recorded in the same month last year.
Gross FDI inflows also fell to $11.07 billion in August from $14.58 billion in July while repatriation and disinvestment rose to $5.83 billion from $3.84 billion during this period, which lowered the net investment retained within India for that month.
Investment balance
Outward FDI by Indian companies moderates
Outward FDI by Indian companies moderated to $1.92 billion from $3.40 billion, partially offsetting the decline in net FDI.
Despite this monthly moderation, cumulative gross FDI inflows rose to $54.93 billion during April-August from $45.55 billion last year.
The data indicates that stronger FDI was the main contributor to the increase in total net foreign investment inflows, rather than a sustained recovery in portfolio flows.