Higher current account deficit and portfolio flows were the highlights of the country's external sector in the second quarter of 2010-11. These might pose a concern in the future too, said RBI.
Higher trade deficit and less support from net invisibles led to a higher current account deficit. Even though export growth remained reasonably strong, robust import demand resulting from high domestic growth led to a large expansion in the size of the trade deficit, said RBI.
OFF-BALANCE | |||
Component |
Period |
2009-10 |
2010-11 |
FDI into India |
April-November |
25.3 |
19.0 |
FIIs (net) |
April-January 14 |
24.7 |
31.6 |
ADRs/GDRs |
April-December |
3.2 |
1.8 |
ECB approvals |
April-December |
13.1 |
16.0 |
NRI deposits (net) |
April-December |
3.5 |
2.3 |
RBI argued the decline in the net FDI was making the task of managing external sector tough.
The moderation in FDI inflows into India during April-November 2010 was driven by sectors such as construction, mining and business services, it said.
A major reason for the decline in FDI is reported to have been the environment-sensitive policies pursued for the mining sector, integrated township projects and ports. This appears to have affected investor sentiment, RBI said.
Then there are persistent procedural delays, land acquisition issues and lack of quality infrastructure, which remain at the centre of the government's policy focus, according to RBI.
Expeditious resolution of concerns could raise the share of India in the projected FDI inflows into emerging market economies in the near future, said RBI.