FDI inflows likely to beat portfolio capital

For the first time in several years, net foreign direct investment inflows into the country were projected to be larger than portfolio capital inflows.

The net FDI for 2006-07 would be around $9 billion, up from $4.7 billion last year, the Prime Minister's Economic Advisory Council said in its update on the country's balance of payments outlook for this fiscal.

"This comprises in-bound FDI of around $12 billion and out-bound FDI of $3 billion. The portfolio capital inflow is likely to be $7 billion this fiscal," the council said in its report released here today.

The current account deficit was likely to be 1.5 per cent of the GDP for the year and $22.6 billion would be added to the country's forex reserves in 2006-07, up from $15.1 billion last year, the report said.

The council has estimated the current account deficit for the full year at $13.4 billion, which is 1.5 per cent of the projected GDP of $900 billion for 2006-07. The figure stood at $6.5 billion for the first half of the current fiscal.

"Of the forex accretion, $8.6 billion has already been absorbed in the April-September period. It is estimated that another $6-7 billion must have come during October-December, leaving a likely amount to be absorbed in Q4 of this fiscal. The monetary policy has to take this into account," the report said.

With the increase in exports and imports, the ratio of total trade to the GDP, signifying the extent of global integration of the Indian economy, would be 35.9 per cent this year, up from 32.8 per cent last year. If software exports were also included, the ratio this year would go up 39 per cent.

The council, which had earlier expressed concern over divergence of trade data of the RBI and the Directorate General of Commercial Intelligence and Statistics, has noted a significant improvement, as the disparity has narrowed by about 50 per cent.

POSITIVE SIGNS

The net FDI for 2006-07 are expected to be around $9 billion, up from $4.7 billion last year

The current account deficit is likely to be 1.5 per cent of the GDP for the year

According to the report, $22.6 billion would be added to the country's forex reserves in 2006-07, up from $15.1 billion last year

The council has estimated the current account deficit for the year at $13.4 billion, which is 1.5 per cent of the projected GDP of $900 billion for 2006-07. The figure stood at $6.5 billion for the first half of the current fiscal