ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

Trouble Ahead on the Balance of Payments?

Some recent happenings on the balance of payments could be smoke signals of trouble ahead.

India’s foreign currency assets as of August 15 were $ 285,975 million, having fallen by $ 13,255 million since end-March 2008. This is a marked reversal when compared to the accretion of $ 110,500 million to foreign exchange reserves in 2007-08. Further, with the world’s major stock markets rendered weak and volatile and with foreign capital withdrawing from the emerging markets, there was a net outflow of foreign portfolio investment to the extent of $ 3,735 million in the last quarter of 2007-08, compared to a net inflow of $ 8,168 million in the corresponding quarter of 2006-07. (In 2007-08, net foreign portfolio investment inflow was $ 29,261 million compared to only $ 7,062 million in 2006-07.) And during the seven months of the current calendar, there has been an outflow of around $ 7 billion on the foreign institutional investor account. Are these happenings, first highlighted by the EPW Research Foundation (EPW, August 23, 2008) cause for concern?

It might be fruitful to take a look at the preliminary data of the balance of payments (BOP) for the financial year 2007-08 as also relevant sections of the Economic Outlook for 2008-09, submitted by the Economic Advisory Council (EAC) to the prime minister on July 30.

Dear Reader,

To continue reading, become a subscriber.

Explore our attractive subscription offers.

Click here

Back to Top