Direct investment rises in FY20, portfolio investment declines: RBI

Mumbai, Jun 30 () Direct investment into the country rose by USD 19 billion while portfolio investment declined by USD 13.7 billion during 2019-20, according to the data on the International Investment Position (IIP) released by the Reserve Bank on Tuesday.

International financial assets of Indian residents increased by USD 73.9 billion due to the rise in reserve assets and overseas direct investment by USD 64.9 billion and USD 13.0 billion, respectively, though other investments declined marginally during the year, the RBI said in a release.

"Overall, net claims of non-residents on India declined by USD 57.6 billion during the year," it said.

It said that despite a fall of USD 13.7 billion in portfolio investment during the year, international financial liabilities increased by USD 16.3 billion as direct investment and other investments rose by USD 19.0 billion and US 11.0 billion, respectively.

The RBI further said that the ratio of overseas financial assets to India's GDP in 2019-20 (at current market prices) moved up to 26.5 per cent in March 2020 (23.4 per cent a year ago), while the ratio of total claims of non-residents to GDP increased to 40.5 per cent in March 2020 (39.3 per cent a year ago).

"The ratio of net IIP to GDP improved to (-)14.0 per cent as at end-March 2020 [(-)15.9 per cent]," it added.

As regards the variation during the January-March 2019-20 quarter, the RBI said that net claims of non-residents on India lowered by USD 45.8 billion to USD 379.3 billion in March 2020.

The decline in net foreign owned assets in India, it said, was due to a reduction of US 28.1 billion in the non-residents' assets combined with an increase of USD 17.7 billion in Indian residents' foreign assets.

Overseas assets of Indian residents' rose mainly due to a surge of USD 17.9 billion in reserve assets, supported by an increase in overseas direct investments even as other investments declined marginally during the quarter.

"The fall in foreign-owned assets was largely due to decline in portfolio and direct investments in India by USD 20.1 billion and USD 8.7 billion, respectively, even as loans availed by residents mainly as external commercial borrowings (ECBs) increased during the quarter; depreciation of the Indian rupee against the US dollar contributed to the decline in foreign-owned assets in India, when valued in US dollar terms," the RBI said.

Reserve assets accounted for around two-thirds of total foreign assets, while the share of debt liabilities in total liabilities increased during the quarter.

"The ratio of India's international financial assets to international financial liabilities improved significantly to 65.4 per cent at end-March 2020 (62.1 per cent a quarter ago; 59.5 per cent a year ago)," the RBI said. NKD CS MR MR MR