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Trade and External Sector

April, 2012


Supportive Government policies, positive business environment, availability of reasonably priced talented workforce and stable outlook for the macro-economy has made India a global hub for international players to park their investments - be it in the form of foreign direct investments (FDI), capital inflows, investment by foreign institutions or foreign institutional investors (FIIs) or through strategic alliances (pacts, joint ventures [JVs], free trade agreements [FTAs] et all).

Key statistics and recent developments relating to India's foreign trade and its ties with the external sector are discussed hereafter-

Capital Inflows

According to the Reserve Bank of India (RBI)'s weekly statistical supplement, India's foreign exchange reserves or forex reserves stood at US$ 292.92 billion for the week ended April 6, 2012. Foreign currency assets aggregated to US$ 258.65 billion and the value of gold reserves stood at US$ 27.02 billion for the week. The value of special drawing rights (SDRs) was calculated at US$ 4.43 billion, and India's reserves with the International Monetary Fund (IMF) came out to be US$ 2.81 billion.


India received FDI worth US$ 2.21 billion in February 2012, registering an annual growth of 74 per cent. Cumulative inflows for April-February 2011-12 stood at US$ 28.40 billion.

The sectors which attracted huge FDI inflows during the 11-month period of 2011-12 are: services (US$ 5.05 billion), pharmaceuticals (US$ 3.21 billion), telecom (US$ 1.99 billion), construction (US$ 2.52 billion), power (US$ 1.61 billion) and metallurgical industries (US$ 1.76 billion).

Mauritius infused highest inflows worth US$ 9.42 billion, followed by Singapore (US$ 5.07 billion), Japan (US$ 2.86 billion), UK (US$ 2.75 billion), Germany (US$ 1.54 billion), Netherlands (US$ 1.21 billion) and Cyprus (US$ 1.42 billion).

The Indian Government has also been very active to boost FDI into the country. It has not only streamlined the procedure to boost foreign investment into the country, but is also planning to ease FDI regulations in sectors like multi-brand retail and aviation.


Indian economy's growth prognosis remains strong for the future which, in turn, is attracting major capital inflows from FIIs. The Government opened doors to such investors in 1993. The market value of listed Indian equities is estimated at US$ 1.3 trillion out of which FII investments are calculated to be around US$ 200 billion.

According to the data released by the Securities and Exchange Board of India (SEBI), net investment in equities made by FIIs stood at Rs 47,935 crore (US$ 9.20 billion) the financial year ended March 31, 2012. During the reported fiscal, foreign fund houses injected Rs 49,053 crore (US$ 9.42 billion) in the debt market taking the collective net investments by FIIs in stocks and bonds to Rs 93,725 crore (US$ 18 billion).

According to data released by SEBI, FIIs invested a little less than US$ 19 billion in corporate debt and debt mutual funds as of February 29, 2012 while their investment in infrastructure has been US$ 2 billion.

Meanwhile, data from EPFR Global reveals that during the first quarter of 2012, exchange traded funds (ETFs) have participated to the extent of 62 per cent of the total net inflows into India, which is around US$ 1.8 billion. It was way higher than 23 per cent in 2011.