FDI focus to improve bolster rupee: Moody’s

December 21, 2015 12:00 am | Updated March 24, 2016 11:11 am IST - NEW DELHI:

Describing India’s focus on FDI as ‘credit positive’, Moody’s Investors Service said improvement in the external situation will also provide support to the rupee.

“If recent changes in the policy successfully shift the composition of foreign capital inflows towards foreign direct investment, it would lower capital account volatility, a credit positive,” Moody’s Investors Service VP (Senior Research Analyst) Rahul Ghosh said.

The government has last month significantly liberalised the foreign direct investment (FDI) regime, putting most of the sectors on the automatic route. According to officials, as much as 90 per cent of inbound FDI comes through the automatic route.

Ghosh further said the improvement in India’s external accounts in recent quarters, coupled with the country’s growth outperformance against major emerging markets, should provide a measure of support to capital inflows and, by extension, the rupee.

He added, “In the past, these (external flows) were skewed somewhat towards portfolio investment, raising balance of payments risks from reversals in investor sentiment.”

The government, in the mid-year economic analysis 2015-16, said India’s external position “appears robust”, with the current account deficit at a comfortable 1.2 per cent of GDP. It further said foreign exchange reserves have risen to USD 352.1 billion (as on December 4), which “seem ample”.

The net FDI inflows have grown from $15.8 billion in first half of 2014-15 to over $17 billion in April-September of the current fiscal, which “is noteworthy against the background of uncertainty in other capital inflows”. It added that the nominal value of the rupee against a basket of currencies has remained steady or strengthened.

“The rupee has gone from being one of the worst performing currencies to one of the best-performing against the dollar this year,” it said. —PTI

Net FDI has grown from $15.8 billion in 2014-15 to over $17 billion in the current fiscal year

Top News Today


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.