Profit repatriation, ECB interest hit 2% of GDP
The flip side of this, however, is that total investment outflows from India — that includes repatriation of profits, interest payments on government bonds and on ECBs — approached nearly 2% of GDP in Q2 FY13, representing a big part of India’s total current account deficit (CAD). Given the Q2 FY13 CAD of 5.4% of GDP, this means such investment outflows formed nearly a third of the deficit.
This overall investment outflow number was 1.6% of GDP in Q1 FY13 and 1.4% for most of FY12.
While repatriation of profits, primarily, was $3.8 billion in Q2 FY13, repatriation of interest income on government and other bond holdings of FIIs added up to another $1.4 billion in Q2 FY13, up 40% from that in Q1 FY13.
Interest payments on ECBs as well as on short-term trade credit, added up to another $2.6 billion in Q2 FY13, a figure roughly the same as in Q1.
According to JPMorgan’s economists, the numbers aren’t particularly surprising since the stock of ECBs, for instance, has shot up 40% over the last two to three years. More generally, a JPMorgan note points out, “the upshot of the sharp increase in
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