Foreign assets in India increased by $39.9 billion due to higher deposits, direct investments, equity and other investments

During the December quarter, foreign owned assets in India increased by $39.9 billion to $776.1 billion over the previous quarter while Indian residents’ financial assets abroad, increased by $22.2billion at $458.9 over the previous quarter, reveals the Reserve Bank of India (RBI)  in its report on International Investment Position (IIP).
 

Net claims of non-residents on India

During the December 2013 quarter, net claims of non-residents on India (net IIP) increased by $17.7 billion to $317.2 billion compared with previous quarter. This change in the net position reflected an increase of $39.9 billion in the value of foreign-owned assets in India vis-à-vis an increase of $22.2 billion in the value of Indian Residents’ financial assets abroad.
 

Source: www.rbi.org.in
 

Indian residents’ financial assets abroad

Indian residents’ financial assets abroad increased by $22.2 billion to $458.9 billion mainly due to a $16.7 billion increase in reserve assets and $5.8 billion rise in other investment abroad; trade credit and currency and deposits. Direct investment abroad observed marginal decline of $0.3 billion, the RBI said.
 

Foreign-owned assets in India

Foreign-owned assets in India increased by $39.9 billion to $776.1 billion, compared with previous quarter, due to a $23.6 billion increased in currency and deposits component of ‘other investment’.
 

Direct investment in India increased by $8.6 billion and portfolio investment in India increased by $5.6 billion during the December quarter. While equity investment increased by $8.0 billion, debt investment decreased by $2.4 billion. Among other investment liabilities, trade credits declined by $1.2 billion and loans increased by $3.2 billion.
 

Effects of Rupee Appreciation

Variation in exchange rate of rupee vis-à-vis other currencies affected change in liabilities. Equity liabilities increased by $16.3 billion, due to the  stock valuation effect resulting from rupee appreciation, while net inflow was $11.5 billion during the period.
 

Composition of External Financial Assets and Liabilities

Reserve assets continued to have the dominant share (64.0%) in India’s international financial assets in December 2013, followed by direct investment abroad (26.1%). Direct Investment (29.2%), portfolio investment (22.8%), loans mainly ECBs (22.1%), trade credit (11.4%) and currency and deposits (12.7%) were the major constituents of the country’s financial liabilities, the RBI said.
 

Source: www.rbi.org.in
 

External Debt Liabilities vis-à-vis External Non-Debt Liabilities

The share of non-debt liabilities decreased marginally to 44.8% as at end-December 2013 from 45.1 percent at end- September 2013. (Refer: Table 3)

RBI issues IIP every quarter, which helps in understanding sustainability and vulnerability of the economy’s external sector. IIP shows the value and the composition of financial assets and liabilities of residents of an economy to non-residents.