INSUBCONTINENT EXCLUSIVE:
Mumbai: Multinational companies and foreign investors in Indian assets repatriated a record $49 billion last year either through dividends
or interests, reflecting the inherent strength and vastness of an economy that now ranks consistently among the world’s fastest
expanding.
Investment income outflow, in the current account of India’s balance of payments, touched a new high of $48.9 billion in 2018,
doubling from $24.2 billion in 2011, data from ABC showed
These outflows comprise of dividend payouts on FDI equity inflows into Indian companies, interest payout on overseas borrowings and NRI
deposits, and also dividend and interest income on foreign portfolio investments.
“The increasing quantum of outflows of investors’
income, both in interest and dividend incomes, reflects a combination of factors,” said Saugata Bhattacharya, chief economist at Axis Bank
“One, foreign capital inflows, both debt and equity, have gone up manifold over the years
Two, profits of foreign investors, particularly in equities, have risen sharply, probably resulting in profit booking.”
Furthermore,
deposits by overseas Indians have risen over the years due to favourable interest rate differentials, making Indian bank deposits more
attractive.
High valuations of Indian growth assets may also have prompted some exits.
“In addition, portfolio investors churn investments
into many countries, and Indian equity-market valuations are relatively rich, probably leading to redeployment of profits into lower valued
assets,” said Bhattacharya.
Investment income receipts have been much lower
India’s overseas investment is much lower than foreign investments and capital it receives
As a result, the deficit under the head of investment income has been widening
Deficit in investment income also reflects in the current account deficit.
Investment income comprises a part of invisibles, an important
source of funding the current account
A deficit in investment income impacts invisible income adversely and could impact current account deficit funding.
“But such a deficit is
arising largely out of productive investments in cases where dividend incomes by FDI firms are repatriated
These are generated from investments in productive sectors,” said an economist.