FDI focus to bolster rupee |
Describing India`s focus on FDI as "credit positive", Moody`s Investors Service said improvement in the external situation will also provide support to the rupee. Moody`s Investors Service VP (Senior Research Analyst) Rahul Ghosh said if recent changes in the policy successfully shift the composition of foreign capital inflows towards foreign direct investment, it would lower capital account volatility, a credit positive. The government has in November 2015 significantly liberalised the foreign direct investment (FDI) regime, putting most of the sectors on the automatic route.As much as 90 per cent of in-bound FDI comes through the automatic route.Ghosh further said the improvement in India`s external accounts in recent quarters, coupled with the country`s growth outperformance against major emerging markets, should provide a measure of support to capital inflows and, by extension, the rupee.In the past, Ghosh said external flows were skewed somewhat towards portfolio investment, raising balance of payments risks from reversals in investor sentiment. India, in the mid-year economic analysis 2015-16, said her external position "appears robust", with the current account deficit (CAD) at a comfortable 1.2 per cent of GDP.It further said foreign exchange reserves have risen to USD 352.1 billion (as on December 4), which "seem ample".
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