Corporate India's overseas acquisition drive has pushed up the outbound foreign direct investment (FDI) by almost five times to 5.4 billion dollars during the first quarter of this fiscal.

"Outward FDI of India also showed significant increase at USD 5.4 billion in Q1 of 2007-08 (USD 1.1 billion in Q1 of 2006-07) due to the appetite of Indian companies for global expansion," the Reserve Bank of India said in a report.

The inflow of FDI during April-June 2007 more than doubled at USD 5.9 billion from USD 2.5 billion dollars during the first quarter of the previous fiscal.

The central bank attributed the increase in FDI inflows to "continuing pace of expansion of domestic activities, positive investment climate and long term view of India as the investment destination".

The RBI report said FDI was channeled mainly into the services sector (37.3 per cent), and followed by construction industry (21.9 per cent).

However, after discounting for the substantial increase in outbound investment, net FDI inflows in the first quarter of 2007-08 worked out to be 461 million dollars, as against 1.42 billion dollars in the corresponding period last fiscal.

The country's foreign exchange reserves, after taking into account the net inflows of 11.2 billion dollars and currency valuation gain of three billion dollars went up to be 213.4 billion dollars at the end of June 2007.

India remained the sixth largest holder of foreign currency stock in the world after China, Japan, Russia, Taiwan and South Korea.

The RBI report said that net inflows of portfolio investment during the first quarter of the current fiscal was 7.5 billion dollars as against the net outflow of 505 million dollars during the corresponding period last year. High inflow of portfolio investment "reflected better corporate performance as well as strong domestic markets in consonance with the trends in Asian stock markets".

The inflows under the American depository receipts (ADRs) and Global Depository Receipts (GDRs) amounted to 308 million dollars during Q1 of the current fiscal, the report added.

Net inflows on account of ECBs were over seven billion dollars, up from about four billion dollars in the first quarter of the previous fiscal.

ECBs inflows accounted for about 45.8 per cent of the total net capital flows during Q1 mainly "enabled by favourable liquidity and the interest rates in the global markets on the one hand, and rising financing requirements for capacity expansion doemstically on the other hand." The net capital inflows during Q1 of 2007-08 totaled 15.26 billion dollars, up from 10.56 billion dollars in the corresponding quarter last fiscal.

Non-Resident India (NRI) deposits, however, witnessed a net outlow of USD 447 million in Q1 of 2007-08, a turnaround from net inflow of USD 1,231 million in Q1 of 2006-07. This reflected the impact of two downward revisions in ceiling interest rates during January and April 2007, RBI said.

Source: Tradingmarkets
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