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N.L DALMIA INSTITUTE OF MANAGEMENT
STUDIES AND RESEARCHMUMBAI
Final Project
Project report
On
CAPITAL FLOWS-AN INDIAN PERSPECTIVE
Submitted to
Prof. Gulab Mohite
BY-
Neha B Verma
PGDBM-FINANCE2006-2008
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N. L. DALMIA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH
CERTIFICATE
This is to certify that the project titled
CAPITAL FLOWS-AN INDIAN PERSPECTIVE
Submitted by:
Neha B Verma
To N.L.Dalmia Institute of Management Studies and Research as per the partial fulfillment of
requirements for the PGDBM course
Specialization FINANCE
During the Academic Year 2006 2008, has been carried out by her under our supervisionand guidance
Prof. GULAB MOHITE
Prof. P. L. ARYA Project Guide Director
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Acknowledgement
An enormous project of this nature calls for intellectual nourishment,
professional help, and encouragement from many quarters.
I express my sincere appreciation to Prof P.L.Arya (Director, N.L.Dalmia
Institute of Management Studies and Research) for considering me as an
eligible candidate for this project and for providing me with the infrastructure for
the project and also the entire faculty, who have provided me the knowledge and
guidance that has facilitated the successful preparation and completion of the
project.I also extend my gratitude to Prof Gulab Mohite for giving me this
opportunity to work on this project and for shaping my understanding in this
particular project through his rich and varied contribution.
Last but not the least; I acknowledge the timely help extended by all my
colleagues and all the unmentioned names from the concerned field.
NEHA B VERMA
PGDBM IV (FINANCE)
N. L. Dalmia Institute of Management Studies and Research
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Executive Summary
Capital flows into an emerging economy has become a hot topic for discussion since there been a
lot of debate on the sustainability of India growing at the pace it is doing now i.e. @ 8.5% (as per 2007 - 08) hence even the RBI has made a committee to study this issue. Mr. Rakesh Mohan
(Deputy Governor of the Reserve Bank of India) is the head of this committee. This report gives
a small but a different dimension of looking at the capital flows. It was prepared taking into view
on India emerging as the next most powerful nation after China in future years.
The different components of capital flows can be determined as FDI, FII, External Commercial
Borrowings etc. In this report, only FDI and FII are taken into consideration. When we look at
the flows can conclude from the analysis that FDI are more stable than FII. One interestingquestion that can be raised out of the flows coming into India is the WHY factor; as to why are
these flows coming to India. There can be 3 aspects to this question. The first being that, Is it a
pure Interest rate arbitrage? Second being the speculative motive, this can be termed as hot
money. The third aspect is a little complex in nature, which is, Whether India is benefiting from
these inflows? The answer to this may not be known but this report will give the insights to the
above-mentioned question.
Again when we take the capital flows into considerations there are various issues coming out of it as:
1. Will capital flows increase Volatility in the financial markets? According to my findings
the answer is mixed.
2. Will it sustain in Medium and long run? To sustain the capital flows reforms process
should be continued.
3. Will India head towards yet another Asian Crisis? No, As Indian economic growth is
mostly fuelled by domestic demand, country is in a better position than its counterparts.
This report will focus on the key point of sustainability of the growth rate that India is currently
experiencing. There are certain recommendations that I have mentioned in this report.
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Table of Contents
N.L DALMIA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH ........ ... 1
Chapter 1 Introduction ................................................................................................................... 1
Chapter 2 External Capital Inflows ........................................................................................ ....... 2
Chapter 3 Indias Economic Prospects ................................................................................... ...... 3
Are they real? India and Globalization; Indias Comparative Advantage ................................. .. 3
3.1 India and Globalization ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... .... ... 3
3.2 Indias Comparative Advantage ......... ......... ......... ......... ......... ........ ......... ......... ......... ......... ...... ..... . 4
Chapter 4 Composition of capital flows ......................................................................................... 6
4.1 Causes of capital flows ........ ......... ......... ......... ......... ......... ......... ......... ......... ........ ......... ......... ........ ... 6
4.2 Effects of Capital Inflows on the Financial Sector ......... ......... ......... ........ ......... ....... ..... ..... ..... ..... . 7
Chapter 5 Sustaining Global Growth ............................................................................................. 8
Chapter 6 Analysis of the Data of FDI and FII ...................................................................... .... 10
Chapter 7 Issues Regarding Capital Flows ................................................................................. 10
Conclusion: Is Indias Growth Sustainable? ......................................................................... ..... 11
Annexure 1 .................................................................................................................................... 14
Trends in flows of FDI and FII flows into India from 1993 to January 2008 ......... ......... ........ ........ 14
Annexure 2 .................................................................................................................................... 15
Calculation of Standard Deviation and Co-Efficient of Variation. .................................................. 15 Bibliography .................................................................................................................................. 16
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Chapter 1 Introduction
Since there has been a huge amount of money that has been transferred from one country to
another and has a consequence of this there has been a lot of debate about the positives and
negatives on the issue of capital flows by various economists across the world. There are
basically two opinions on this issue.
1. On one hand there those who say that the capital flows for the recipient country are very
dangerous.
2. On other hand there are others who say that there is no need to worry about these flows
and hence policy makes should concentrate more on the domestic policy rather than
thinking on this issue.
Falling risk premiums were considered as the cause behind the inflows in Latin American
Countries in the early 1990s but since there were consistent capital flows changed thisassumption. And a new assumption that rose above the assumption of risk premium was of
domestic interest rates. All the emerging countries that had higher interest rates resulted in higher
capital inflow of capital flows.
Well both the assumptions are it fall in risk premium or rise in Interest rates cannot prove to have
a proper explanation for rise in capital flows.
There were other factors as well, In particular, the recession in developed countries reduced rates
of return on capital and made investors look for higher returns elsewhere. Likewise, since the
Asian financial crisis, foreign capital has retreated from most emerging economies, regardless of
the quality of domestic policies. In some cases, the sudden stop has been particularly traumatic.
And has often left deterioration in the other emerging economies.
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House Hold
Firms Government
ExternalSector
S a l a r i e s
I n v e s t m e n t s
Banks
MutualFunds
Insurance
MarketsInvestment Intermediaries
Chapter 2 External Capital Inflows
The external sector refers to a basket of economic measures regarding any individual country.
These measures include:
Balance of payments
Current account
Capital account and financial account
Foreign direct investment
Portfolio investment
Other investment
External debt
Average exchange rate of private external debt
Debt service
Reserves assets
International investment position
In every Economy there are 4 Major Sectors and there are different externalities surrounding it.
In India money flows from household sector which is in surplus to firm sector which is in deficit
for various reasons like Expansion, Diversification, Risk Hedging etc. The money also flows
from house hold sector to Government via banks and other financial intermediaries. The money
that goes to the firm sector flows back to the household sector via salaries in this circular flow of
money there are many leakages which leads to the needs in the External Sector coming to play a
major role. Following is the flow diagram of the Circular flow of money in India.
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Chapter 3 Indias Economic Prospects
Are they real? India and Globalization; Indias Comparative Advantage
India has now become one of the fastest growing economies worldwide. Hardly a day passes
without somebody saying that India is arriving or has arrived. Even optimistic forecasts, like
BRIC (Brazil, Russia, India and China) by Goldman Sachs have been updated by newer
discoveries of Indias potential and fresh hopes. Our place in the world economy seems
unshakeable and set to grow.
3.1 India and Globalization
There has been a debate worldwide on globalization; not even a single meeting will go till the
end till the word globalization isnt heard off. Again there are 2 people First are those who totally
disregard globalization and its process and other are with the globalization.Well Frankly speaking neither view for or against is correct. What we can do is by accepting
it as the realty which has the momentum of its own. Our job is to just maximize the profits of it
by reducing the risks coming out of this process. Today the destiny is in our own hands.
Well to define globalization there can be 2 meanings of it and whether globalization is good or
bad can only be explained when we look at both the meanings of it. On one hand we have the
meaning of globalization as the shrinkage of distance or the other meaning that it posses is of the
technological changes and associated policy changes that have brought the world economiesmore and more integrated with each other. Let us have a look at the second definition of
globalization.
In this particular sense India is in a very advantageous position considering the position of
Indias foreign trade and positive capital flows. Today India is at a very different position that it
would have been some 20 years ago. This is mainly because of a theory of comparative
advantage and India has more comparative advantage in the world as compared to other nations
of the world.
One more aspect that globalization has brought for India is may be it has brought in a Service
Revolution into India. Earlier the main focus was on manufacturing sector which includes the
manufacture if foods and agricultural commodities now the focus has changed to Services Sector
i.e. Transport and trade and banking and construction etc.
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In the last few years, there has been a phenomenal change in the conventional view of services
and their role in the economy. This change has been facilitated by unprecedented and unforeseen
advances in computer and communication technology. As a result, the development of certain
services is now regarded as one of the preconditions of economic growth, and not as one of its
consequences. The boundary between goods and services is also disappearing. Many industrial
products are not only manufactured, but they are also researched, designed, marketed, advertised,
distributed, leased and serviced. From Indias point of view, these developments provide
opportunities for substantial growth. For example: The fastest growing segment of services is the
rapid expansion of knowledge-based services, such as, professional and technical services. India
has a tremendous advantage in the supply of such services because of a developed structure of
technological and educational institutions, such as this one, and lower labor costs.
Well one of consequence of globalization can be that any vulnerability of one country can betransmitted to another country very easily like in East Asian Crisis
Indias last hope is the youth of India to go out and face the globalizing world which will keep
Indias Interest and Integrity and its indivisibility and its future potential. If all goes well India
will be a very different place to live in 2025, and truly will become a great nation which
everyone will be proud of.
3.2 Indias Comparative Advantage
Every country has a comparative Advantage for India there are 4 comparative advantages that
India has let us take a brief look those comparative advantages of India
1. Skills
2. Integration of financial markets
3. Technology i.e. less interference of government
4. Strong International Reserve Position
Let us take a look at it individually
The first is our skills. This is evident not only in knowledge industries. Even in cars today, a lot
of new content, or what economists call value-added, comes from technology, skills, software
and so on. Our growing mass of educated people, larger than the population of a European
country, is an asset a comparative advantage over other nations.
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The second factor is the integration of financial markets, the practically free flow of capital.
Money is no longer a constraint for a company with a new project, either at home or abroad,
even though we do not have full capital account convertibility. There is no shortage today even
of equity capital.
The third is the change of technology, aided by a great reduction in government control. Today, a
new project will take much less time than earlier days. Today, the corporate sector has
restructured, new entrepreneurship has come of age, we are buying companies, the US is afraid
of their jobs being taken away by us rather than the other way round.
The fourth factor is our strong foreign exchange position. . Part of the excitement about India in
the outside world is owing to the fact that India is no longer a debtor country looking for aid.
India is lending to the IMF, instead of borrowing from it. This has brought has complete change
in the global outlook for India. India is now perceived as a strong economy, compared todeveloped economies
If we compare ourselves to China, we find that we have similar entrepreneurship skills and
similar forex advantage although china has more reserves than what India has but still its
progressing and we are emerging has a attractive destination for investment We also have the
strength of our democracy and the power of the people. So a growth of 9 % or 10 % is no longer
a dream and can be very well been achieved.
But there are a few hurdles on this course; the main reason for this is what people call the public-
private dichotomy. If we see there has been a considerable increase in private sector but public
sector lacks behind.
For Example if u want to open a sports facility in India you will have to knock at least 8 planning
commission and government doors before you get the permission for it and each person will have
his staff which will be needed to be made happy.
Second hurdle can be of accountability and this has to be taken seriously. All the ministers have
now been made accountable to the powers that they enjoy.
Thirdly the government must do some sort of outsourcing there are many areas where it should
not play any role.
Well these hurdles may not matter in where India is looking for a 6% growth but will defiantly
matter when India wants to grow at 9% or the growth that India may see may be unsustainable.
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Chapter 4 Composition of capital flows
Capital flows can be broadly classified into 3 types as FDI (Foreign Direct Investment), FII
(Foreign Institutional Investment) and ECB (External Commercial Borrowing). All 3 of them are
different in nature some are more dominant and some are more stable some may bring in more of
just capital while some may bring stability and growth. Although there are many who rate the
above flows from least volatile to be ECB followed by FDI and FII. There is no statistical proof
of the above hypothesis. There is no evidence to term money as HOT or COLD. There is no
evidence that a particular flow may bring more of economic growth or particular flows are
sustainable and hence good for the economy. The countries where you find that there is more
scope will attract more of portfolio flows while in some countries these portfolio flows may
required to pay premium. And hence the countries which are poorly developed in terms of
financial markets may find it easy to attract more of FDI rather than FII
4.1 Causes of capital flows
What can be the possible causes of these flows from one country to another in last decade and
this decade? The main reason behind these flows coming to India may be coz of search of higher
returns and hedging of risk. Let us see the factors in more detail.
4.1.A Internal Factors
When we say about the Internal Factors we can see 2 main reasons behind this flow of capital1. Creditworthiness
2. Productivity Gains
Creditworthiness has improved as a result of External debt restructuring.
While the productivity gains are arising out of reforms in the overall financial structure.
Well there was also a argument that only domestic changes made these flows to emerge but this
hypothesis was proved wrong when in some countries the external factor contributed more and
even post dated some of these flows. Following are the 3 main things to observe when a country
is surged with capital flows.
Countries with high investment to GDP ratio, low Inflation have received more capital
flows as compared to other countries
FIIs are more sensitive to interest rates.
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4.1.B External Factors
When we say the external factors the first thing that attracted the flows were the decreasing
global Interest rates and global recession in United States and Japan this may be the primary
reason behind the flows coming to India looking for more opportunities. There are mainly 2 main
development in these flows, First, falling communication costs, strong competition, and rising
costs in domestic markets, led firms in industrial countries to produce abroad to increase their
efficiency and profits. This triggered FDI to splurge into emerging economies. The second is the
development of Financial Structure and importance of institutional investors.
When we say development of financial structure we mean better opportunities in financial
markets to earn better returns and better opportunities for Risk diversification and liquidity.
4.2 Effects of Capital Inflows on the Financial Sector
The effects of capital flows in a economy can be broadly classified into 2 types first is that it
increases the quasi fiscal deficit and secondly it also increases the maturity mismatch between
the bank assets and liabilities which in turn reduce the quality of the loans provided, Although
the vulnerability of the financial sector because of lending led to high and unsustainable price
rise in the assets. This will result in resource misallocation and then eventually will lead to fall in
the asset prices and eventually lead to fall in the Interest rates. According to the World Bank,
countries with the highest increase in bank lending were not only the ones that later experienceda banking crisis but also were usually the ones in which financial vulnerability was higher
measured by increases in the current account deficit, real exchange rate appreciation, excess
consumption, and underinvestment.
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Chapter 5 Sustaining Global Growth
We can see the strongest growth period in the history of world economy leading in the forefront
by China and India so the main questions to be answered here are:
1. What have been the sources of this global prosperity?
2. How can we ensure that the momentum is sustained over the medium term?
3. And what are the implications for global imbalances, including in particular the large
U.S. current account deficit?
1. What are the Sources of the Global Productivity Boom?
All the countries who have had major structural changes in opening of their economies and
advancing market reform have led to the increase in the global productivity boom. This
productivity growth is also supported by the term globalization. The shifting of productive
structure has also been supported by the increasing capital flows especially FDI and FII. Theseflows are not only a source of finance but also of new technology and management skills. Better
policies in these countries will ensure sustainability of these flows in the recipient countries
2. Can the Productivity Boom Be Sustained?
Globalization word is often taken in the wrong sense it is taken more in negative sense, it says
that the process of globalization only helps a few countries across the world and within those
countries only a few states. And hence we need major changes in those areas of low income
countries these changes can be easy access to advanced countries, the gains from the
globalization should be more properly distributed
These things are more important in emerging markets rather than in developed economies.
Global integration of trade and financial markets has produced more benefits for these countries
and the main cause behind this is the increase in the income levels that has eventually allowed
the living and working standards to converge towards the levels found in developed economies.
But this is only possible if the advanced economies share the gains of this growth with the
middle income economies.
Another crucial issue to maintain this boom in the productivity is maintaining growth even with
the aging population this is so especially in the advanced economies there are risks of mismatch
between the labor and the needs. The rise in the aging population will increase the fiscal cost
which is controlled as of now due to rapid expansion and growth. The last concern is that of the
technological and communication gap in the advanced economies and emerging and middle
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income economies, because of this gap the advanced economies are reaping big profits. The
sustainability of the productivity will also depend on the employment of a large chunk in the
agricultural sector at least in India and China and hence the agricultural sector of these countries
still remains as the main concern.
3. Implications for the Unwinding of Global Imbalances
If there is a slowdown in the productivity growth it will have its consequence on the investment
and consumption trends this will in turn have an impact of global imbalances. To Maintain the
same GDP growth rates in the face of slower growth of total productivity will require even more
capital accumulation than what is there as of now. At the same time the future income growth of
consumption will also have to be maintained at the same level although the gross aggregate
consumption is likely to increase with the increase in the population. This may increase the real
interest rates. And hence countries with large current account deficits like the United States mayfind it difficult to attract more foreign capital. Although they have an advanced and most
developed financial system we must remember one thing that other emerging markets may cope
up with the gap between the Financial Sector of these advanced economies and emerging
economies. More generally, joint action by both advanced and developing economies will be
important to ensure an environment conducive for the smooth unwinding of global imbalances.
There has to be changes not only in the countries own interest but this change should be for
concurrent actions across all the countries so bring about the synergies in these economies.
Although these adjustments may bring short term cost but will in turn provide better long term
stability.
Concluding Remarks
Every one remains optimistic on the future of the sustainability of the growth but reforms
are needed to ensure not only to maintain the same productivity but also to share the
benefits arising out of these reforms. Everyone is aware of the rising population and
concerns of globalization. Care must be taken that some groups may be adversely affected
and need to be given greater support in adjusting to increasingly global markets, without
obstructing the process of change. Doing so will prevent the emergence of cautious
approach to easier sustaining the global growth. Providing such reforms is never easy but it
is a gradual process and will defintly provide financial sustainability.
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Chapter 6 Analysis of the Data of FDI and FII
When we look at the data of FDI and FII we can see some key findings from the data. FDI flows
are more stable than FII flows and this hypothesis can be proved using certain Statistical tools
viz.
1. Standard Deviation
2. Co-Efficient of variation
3. Correlation
Standard Deviation: Using Standard Deviation we can find out how much the observations
deviate from the center i.e. the Mean So from the data that is given below we can conclude that
FDI deviate less from their overall average. (See Annexure 3)
Co-Efficient of Variation: Since Standard Deviation is only half of the story we cannot conclude
from Standard Deviation that the data is more stable than the other, Hence we need to calculateCo-Efficient of variation which will help us to calculate the exact Deviation of the data and the
volatility of the data.(See Annexure 3)
Correlation: The correlation tells the relation between any 2 variables from the above analysis we
can conclude that there is very less correlation between FDI and FII it is hardly 0.24 percent
which is less but there are positive signs since there is at least a positive correlation. (See
Annexure 3)
Chapter 7 Issues Regarding Capital Flows
From the above report and its analysis although we can see that for long term stability we have to
more of FDI than FII but still we need to solve certain Issues which arise out of these flows.
These issues are very complex in nature and need to be examined individually. These issues can
be listed out as follows:
1. Volatility
2. Sustainability
3. Crisis Prevention
4. Proper Exchange Rate Management
5. Capital Account Liberalization
6. Liquidity Management
In this report we can look at one of the Issues which are essential to Success of India which is
of Sustainability.
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Conclusion: Is Indias Growth Sustainable?
The question of Indias growth whether is it sustainable or is it that India is over heating. On one
hand there are lots of structural problems For instance, in Bangalore; water is only available 2-
1/2 hours a day. Bangalore is not some remote village in India. It is the IT hub of India; the
average manufacturer loses 8-1/2 percent of their output to power outages. That is more than 4
times the percentage than you see in China or Brazil. Sixty percent of manufacturers own
generators. That is several times what we see in China and Brazil, at 27 percent and 17 percent,
respectively. There are some about 800 million people living in India under Rs. 100 a day and
hence poverty also remains a major issue in India. But still even after having such discrepancies
India is still growing at the rate of 8% which is very remarkable. There is no secret to this; this
growth is only possible because of the changes brought in by the major economic reforms
brought in by the government in 1991. Everyday in the news paper and news channels acrossIndia are talking about the services sector of India. But actually we see that manufacturing and
the industrial sector is doing quite well, too, if we look at the trend line i.e. compare with the
GDP trend line it is outperforming the GDP. More recently we have seen some big success
stories too for instance Probably the most high-profile of them is Tata Steel which as many of
you undoubtedly know has just purchased Corus, the former British Steel, for $12 billion. Tata
Steel is by no means alone in that category. Everything looks good till here but we are also
seeing the signs of over heating. Capacity utilization is at its peak but then it is the lowest since
we started to calculate. The parameters are used to calculate the labor unemployment needs to be
changed. Although the wage growth in India is increasing but it is not increasing at the unskilled
sectors. The wholesale price index has increased by 2% on a YOY basis. When we turn our
attention to the financial markets side we can see that there is a boom in the stock markets and
since the markets are not as deep as in the advanced economies a person can easily get the credit
cards and loans for housing etc. but this has in turn raised the valuations. We see a boom also in
the real estate market. Since earlier this decade, we have seen house prices double in some parts
of India. Now since we have seen the signs of India being overheating let us have a look at the
other side of the coin. There are three things from which we can conclude that India is growing
are
1. Demographics
2. Productivity Boom
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3. Financial Sector deepening.
Demographics the dependency ratio is falling in India. As the counterpart to that, we see a big
increase in the working age population in that some 140 million people will enter the work force
over the next decade. In fact, a key policy challenge is to make sure that all those people can find
employment.
Productivity when we say productivity we are referring to total factory productivity not only the
output but also the productivity of labor capital and human capital taking into consideration all
the inputs of the economics. This productivity has increased from 1.5% to 3 %.
Financial deepening Private credit is relatively low in India as compared to many countries in the
world. For example, it is about 43 percent of GDP in India compared to about 75 percent in Asia
at large, but there is evidence as we said of overheating as well. So the question is how to
balance these two factors. How do you get sustainable growth with price stability in India? Wesee four steps here.
1. Money policy
2. Public Debt
3. Infrastructure
4. Capital Markets
We can see that on money side we RBI has been very accommodative on this splurge. RBI has
timely has intervened and made the statutory requirements for the banks have been increased
although this has reduced the inflation in India but the policy is still on the accommodative side.
Money is growing at about 20 percent a year every year. So a continued tightening is required
and gradual removal of the accommodation is required so that the risk is reduced. Since the
inception of FRBM bill the fiscal deficit is also moving in the right direction. They are in the best
of the shapes. We have seen the overall fiscal deficit, that is, if you combine the state and federal
government fall from move-out from about 10 percent of GDP earlier this decade, to close to 4.8
now. But at the same time, the deficit is still pretty big.
Debt is pretty high, too. Debt is about 80 percent of GDP. So bringing that down would be useful
from a couple of perspectives, like the monetary policy.
Infrastructure as it has been mentioned earlier that infrastructure needs to be enhanced, and
obviously there is a role for the government to play here. Just to focus in on that question for a
second, we can actually see that compared to China, for example, infrastructure investment is
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pretty low. Overall infrastructure investment is about 5 percent of GDP in India, and it is about
three times that in China, so there is some scope it would seem to ramp that up. Finally, on the
capital markets development side, a lot has been written and said about development of capital
markets in Asia, especially, for example, corporate bond markets, but we can see that even by the
metric of emerging Asia, the corporate bond market is pretty small in India. It is only around 5
percent of GDP or maybe slightly less. The different measures that are to be taken can be,
developing the basic foundations of capital markets in India better, the government bond markets
and the money markets and making those more liquid and deep. Also through pension reforms to
expand the investor base for corporate securities.
So the bottom line is, through the combination of these types of steps, through a better
alignment of monetary and fiscal policies, through boosting the infrastructure, and
developing capital markets, we think that India can strike the right kind of tradeoff
between overheating and growth and really make growth sustainable and strong over the
medium-term.
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Year FDI FII1997 126.28 186.511998 29.33 11.721999 99.25 241.572000 120.66 190.652001 164.05 472.042002 178.17 149.272003 113.65 1,138.67
2004 168.91 964.332005 188.63 911.152006 492.45 459.002007 83.22 -5.812008 51.24 290.83
Annexure 1
Trends in flows of FDI and FII flows into India from 1993 to January 2008
Note1. Rupees in Million Crore
2. Data of 2008 is till February only
Source for the above Data is SEBI and Department of policy and promotion of India
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Year FDI FII X - MEAN (D) Y - MEAN (E) X - MEAN 2 Y - MEAN 2 D * E1997 126.28 186.51 -25.04 -230.98 627.21 53,353.76 5784.791998 29.33 11.72 -121.99 -405.77 14,880.85 164,650.37 49498.861999 99.25 241.57 -52.07 -175.92 2,711.61 30,947.96 9160.71
2000 120.66 190.65 -30.66 -226.85 939.80 51,458.81 6954.192001 164.05 472.04 12.73 54.54 162.03 2,974.90 694.272002 178.17 149.27 26.84 -268.23 720.65 71,946.44 -7200.572003 113.65 1,138.67 -37.67 721.17 1,419.34 520,092.90 -27169.592004 168.91 964.33 17.59 546.83 309.48 299,024.87 9619.822005 188.63 911.15 37.31 493.66 1,392.03 243,699.87 18418.402006 492.45 459.00 341.13 41.51 116,371.67 1,722.72 14158.952007 83.22 -5.81 -68.10 -423.30 4,637.21 179,181.48 28825.382008 51.24 290.83 -100.08 -126.67 10,015.42 16,044.36 12676.40
Mean 151.32 417.49 154,187.28 1,635,098.44 121421.61
Vari ance Std Devi ati onCo Efficientof Variation Correlation
FDI 12848.93959 113.3531631 0.749095299 0.181368153
FII 136258.2037 369.1316889 0.884161876
Annexure 2
Calculation of Standard Deviation and Co-Efficient of Variation.
Note3. Rupees in Million Crore
4. Data of 2008 is till February only
15
8/8/2019 Capital Flows an Indian Perspective-Neha Verma
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Bibliography
Websites
www.rbi.org.in
www.google.com
www.sebi.gov.inwww.dipp.nic.in
www.imf.org
www.worldbank.org
Reference Notes and Research Working Papers
IS INDIA'S HIGH GROWTH SUSTAINABLE? By Charlie Kramer Division Chief Asia and Pacific Department, International
Monetary Fund
PATTERNS OF CAPITAL FLOWS TO EMERGING MARKETS: A
THEORETICAL PERSPECTIVE
By Zhaohui Chen and Mohsin S Khan for International Monetary Fund
LARGE CAPITAL FLOWS: A SURVEY OF THE CAUSES,
CONSEQUENCES, AND POLICY RESPONSES
By Alejandro Lopez-Mejia for International Monetary Fund
CAPITAL FLOWS AND THEIR MACROECONOMIC EFFECTS IN INDIA
By Renu Kohli for International Monetary Fund
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