The undercount
The recent spurt of data reconciliation in connection with COVID-19 deaths in a number of States confirms long-held suspicions of inaccurate mortality being reported previously.These revisions will represent a truer estimate of fatality, in turn leading to better epidemiological data needed to track the intensity of the outbreaks.
Dr. Thomas Palocaren,
Vellore, Tamil Nadu
Surge in FDI inflows
In the article, What explains the surge in FDI inflows ( The Hindu , OpEd page, June 2, 2021), which analysed data released by the Ministry of Commerce and Industry on May 24, 2021 and the May 2021 bulletin of the Reserve Bank of India (RBI) regarding Foreign Direct Investment (FDI) inflows in India, the RBI data appear to have been misinterpreted. The analysis of the reasons behind the buoyancy in FDI inflows is erroneous. The writer seems to suggest that the FDI inflows of U.S.$81.72 billion include amounts attributable to ‘repatriation/disinvestment’ and ‘FII investments’ with the surge in FDI inflows (to U.S.$81.72 bn in 2020-21) being attributable to an increase in ‘repatriation/disinvestment’ and ‘FII investments’.
FII investments are different from FDI. FII investment amounts have not been included to calculate FDI inflows. FII investments of U.S.$38 billion in 2020-21 have been categorised separately by the RBI and do not form part of the FDI inflow figure of U.S.$81.72 bn. If the writer’s intention was to demonstrate the staggering increase in aggregate foreign exchange inflows under the FDI and FII routes, U.S.$119.8 billion should have been quoted. Aggregate foreign exchange inflows under these routes witnessed an increase of 59.88% over the figure of U.S.$74.94 billion in 2019-20. The writer appears to attribute the amounts in respect of ‘repatriation/ disinvestment’ to investments from private equity funds and also seems to suggest that the ‘repatriation/disinvestment’ amount has been taken into account to calculate the FDI inflow figure of U.S.$81.72 bn. However, ‘repatriation/disinvestment’ of U.S.$27 billion in 2020-21 has been categorised separately by the RBI and does not form part of the FDI inflow figure.
India attracted the highest ever FDI inflows of U.S.$81.72 bn in 2020-21, higher by 10% over 2019-20. FDI inflows remained buoyant despite challenges associated with the COVID-19 pandemic and the national lockdown. The Government of India has put in place a stable, predictable and transparent policy environment and continues to take measures to develop infrastructure, improve the business environment and liberalise the FDI policy regime. Their effects will continue to deliver results.
Yogesh Baweja,
ADG (Media & Communication),
Ministry of Commerce and Industry
Sukhchain Singh,
Asst. Director (M&C),
Press Information Bureau,
National Media Centre,
New Delhi
R. Nagaraj responds:
As stated in the article, ‘total FDI inflow’ of $81.72 bn in 2020-21, as in the Commerce Ministry’s press release (May 24, 2021), is identical to “Gross inflows/gross investment” in the RBI Bulletin (RBIB) (Foreign Investment Inflows; Table 34, row no. 1.1.1.1). Likewise, the FII investment of $38 bn mentioned in the Ministry’s response is similar to the figure reported in the RBIB table, row no. 1.2.2. Similarly, ‘repatriation/disinvestment’ of $27.056 bn is also recorded in the same table, row no. 1.1.1.2.
In the RBIB tabulation, a few arithmetical identities define these financial flows. For instance, gross inflows (1.1.1.1) are related to ‘Direct Investment to India’ (1.1.1) and repatriation/disinvestment (1.1.1.2). ‘Foreign Investment Inflows’ (1) is the sum of ‘Net Foreign Direct Investment’ (1.1) and ‘Net Portfolio Investment’ (1.2). ‘FIIs’ (1.2.2) is a sub-set of net portfolio investment (1.2). By rearranging the rows in Table 34, we get the following identities: Identity 1: Gross inflow (1.1.1.1) = Foreign investment inflow (1) + Repatriation (1.1.1.2) + FDI by India (1.1.2) – Net portfolio investment (1.2); Identity 2: FIIs (1.2.2) = Net portfolio investment (1.2) - GDRs/ADRs (1.2.1) – Offshore funds and others (1.2.3) + portfolio investment by India (1.2.4). Plugging in the values from the table for 2020-21 against each variable (in billion dollars), we get the following arithmetical identities: Identity 1: $81.721 = $80.209 + $27.056 + $11.299 - $36.843; Identity 2: $38.097 = 36.843 – 0.0 – 0.0 + 1.254.
As reported in the table, the above identities show that Gross inflows are related to: net foreign portfolio investments and repatriations/disinvestment, contrary to the claims made in the Commerce Ministry’s response. Hence, the official contention that total FDI inflow does not include portfolio investment and repatriations is not tenable.
