Twenty22-India on the move

12.11.09

It's nearly been a year

Renovation continues at the Taj Heritage Wing ,Mumbai.

Foreign direct investment (FDI) inflows slowed to $1.5 billion in September this year, the lowest since December 2008. Last year, the same month witnessed inflows of $2.5 billion, while the preceding two months clocked FDI of $3 billion each, the latest data from Reserve Bank of India (RBI) show. However, economists have termed the lower inflow during September a mere ‘blip’. “Once money is committed, inflows tend to bulge and slow down in certain months,” said an economist with an investment bank. Also, a look at total FDI inflows, including reinvested earnings and other capital, in the first-half of the current fiscal at $17.7 billion depicts marginally-better performance compared with those in the corresponding period of the previous fiscal ($17.2 billion). However, equity inflows during April- September this fiscal work out to $15.65 billion compared with last year’s $17.2 billion, the balance being from reinvested earnings and other capital. If one compares FDI inflows sequentially through last three half-yearly periods, covering the period prior to and after the Lehman collapse, FDI inflows have been fairly stable, compared with portfolio flows through foreign institutional investments, American Depository Receipts (ADRs) and Global Depository Receipts (GDR) routes. Total FDI inflows in the last three half-year or six-month periods were stable at around $ 17 billion in the sixmonth period each. Pure FII inflows in the first half of the current fiscal amounted to $15 billion compared to net outflows in the same period a year ago. Even factoring in strong revival of capital flows through this route, FDI inflows so far this year are higher than FII inflows.

October exports shrink 11.4%

India’s exports contracted at a lower rate in October than in recent months following an improved show by a number of sectors, suggesting that demand may be finally looking up in the developed world. If the current trend continues, exports could turn positive in January, commerce secretary Rahul Khullar said. However, the overall export figures for the fiscal year would be marginally lower than those for the previous year, he added. Exports contracted 11.4% in the month, but this is still seen as an improvement as the fall in exports was steeper in preceding months, some times as high as 39% witnessed in May 2009. In September 2009, the fall in exports was 13.8%. A part of the improvement could be because of the base effect, or the statistical impact of a steep a decline in exports in October 2008 due to the global economic downturn. The continued decline in heavyweight sectors such as engineering goods and ready-made garments also has taken some sheen off the October numbers. The improvement is due to better performance by a number of high-value exports sectors such as pharma, cotton yarn fabrics, electronic goods and iron ore in recent months. This is the first vindication of the green shoots hypothesis, Mr Khullar said, adding sectors such as gems & jewellery and agri products also did well. Addressing a parliamentary consultative committee meeting, commerce & industry minister Anand Sharma said the impact of the global recession was still affecting exports. But the stimulus packages have helped arrest the decline, he added. Amid a debate over the withdrawal of stimulus measures, the sign of pickup could invite suggestions of a rollback in export sectors as well. Mr Kullar, however, said there shouldn’t be a rollback just on the first signs of a recovery. With Christmas and New Year approaching, exporters are hopeful of an uptick in demand in the EU and the US, their largest markets. The US economy has already come out of the recession by recording a 3.5% growth in the gross domestic product in the September quarter. The European Union is set to grow by 0.75% in 2010 and 1.5% in 2011, said the autumn forecast of the European Commission (EC) for 2009-2011. Imports of sensitive items, including edible oil, rose by 30.4% during April-August this year, propelled by a 424.8% jump in the shipments of milk and milk products. The overall import of the items went up to Rs 22,429 crore during the period from Rs 17,206 crore in the same period last year, according to official data released on Wednesday. The imports of edible oil, milk and milk products were at Rs 8,994.36 crore and Rs 96.30 crore in April-August, respectively, against Rs 4,791.49 crore and Rs 18.35 crore last year.