The Hindu : Business : Ease ECB norms to halt fall in capital inflows: panel

Online edition of India's National Newspaper
Thursday, Aug 14, 2008
ePaper | Mobile/PDA Version

Business

Business

Ease ECB norms to halt fall in capital inflows: panel

Special Correspondent

Economic Advisory Council projects 34 per cent decline in capital flows

NEW DELHI: The Prime Minister’s Economic Advisory Council (PMEAC) on Wednesday projected a 34 per cent decline in foreign capital flows on account of the uncertain external environment and prescribed easing of external commercial borrowing (ECB) norms to help corporates tide over the situation by borrowing from overseas debt markets.

In its ‘Economic outlook for 2008-09,’ the council pointed out that the total capital inflows during 2008-09 were expected to decline to $70.9 billion from $108.03 billion in the previous fiscal, mainly owing to a likely decline in portfolio and private equity investment.

“Since we are not expecting larger capital inflows, the government could relax the restrictions imposed on ECBs in the past,” PMEAC’s outgoing Chairman C. Rangarajan said at a press conference here.

The net addition to the country’s foreign exchange kitty, the PMEAC said, was likely to be $30 billion, about a third of the level last year. The policymakers would, therefore, “face a situation of greater volatility in capital inflows on account of uncertain external environment.”

Fall projected

The council projected that the private equity inflows during the current fiscal would fall to $7.5 billion from about $10 billion in 2007-08.

As for the inflows from foreign institutional investors (FIIs), PMEAC said: “There may be some resumption of inflows in the second half of this fiscal... The net FII accrual at the end of the year would be of the nominal order of $1.3 billion.”

In 2007-08, India received FII inflows totalling $20.3 billion. While the PMEAC is expecting a substantial fall in aggregate portfolio investment, the net FDI (foreign direct investment) inflows, however, are expected to rise by 27 per cent to $19.7 billion.

Printer friendly page
Send this article to Friends by E-Mail

Business