NEW DELHI, Dec 6 : Net Foreign Direct Investment (FDI) inflows have declined in the first six months of the current financial year by 8.6 per cent to USD 3.6 billion from USD 3.9 billion in the same period a year ago, RBI Governor Shaktikanta Das said on Friday.
This is despite the gross foreign direct investment (FDI) inflows growing by 25.6 per cent to USD 42.1 billion in April-September 2024-25 from USD 33.5 billion during the same period a year ago, Das said, adding net FDI moderated during this period due to higher repatriations and rising outward FDI.
Foreign portfolio investment (FPI) inflows to Emerging Market Economies (EMEs) have generally declined in October 2024. Net FPI inflows to India stood at USD 9.3 billion in 2024-25 so far (April-December 4), supported mainly by inflows in the debt segment. External commercial borrowings and non-resident deposits, on the other hand, witnessed higher net inflows compared to last year.
Net portfolio inflows into EMEs during October 2024 stood at USD 1.9 billion as compared with USD 33.9 billion and USD 56.4 billion in August and September 2024, respectively. While the debt segment recorded a net inflow of USD 27.4 billion in October 2024, there were net outflows from the equity segment to the tune of USD 25.5 billion during the month amidst escalating geopolitical tensions, elevated policy uncertainty, and rebalancing of portfolios, Das said while announcing the Credit Policy.
He, however, said that India’s external sector remains resilient, as reflected in various key indicators where India has been consistently performing well.
India’s CAD/GDP ratio stood at 0.7 per cent in 2023-24 (2.0 per cent during 2022-23), and 1.1 per cent during Q1 of 2024-25 (1.0 per cent in Q1 of 2023-24). India’s external debt to GDP ratio declined marginally to 18.8 per cent at end-June 2024 from 18.9 per cent at end-March 2024.
The import cover of reserves stood at around 11 months as on November 22, 2024, while the net international investment position (IIP) remained unchanged at 10.3 per cent of GDP at the end of June 2024, he added.
In order to attract more capital inflows, it has been decided to increase the interest rate ceilings on FCNR(B) deposits.
Accordingly, effective from today, banks are permitted to raise fresh FCNR(B) deposits of 1 year to less than 3 years maturity at rates not exceeding the ceiling of overnight Alternative Reference Rate (ARR) plus 400 bps as against 250 bps at present.
Similarly, for deposits of 3 to 5 years maturity, the ceiling has been increased to overnight ARR plus 500 bps as against 350 bps at present. This relaxation will be available till March 31, 2025, the Governor said.
(UNI)
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