Trade Analytics

Trade and External Sector

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Trade and External Sector

July, 2012


India has always been an investor-friendly and liberal nation. Investors across the globe have retained faith in the resilience of the Indian economy and hence have been increasing their holdings in Indian companies. The country has aligned itself well with global patterns to accept foreign institutional investments (FIIs), capital inflows and foreign direct investments (FDI) with open arms. The Government also, has always played vital role in formulating external policies and foreign trade regulations and hence, has stayed an active member on the global stage when it comes to bilateral talks and strategic alliances.

India enjoys numerous well-cemented trade relations across the developed world including the US and the UK. While UAE appears to be the most significant trading partner, relations with Saudi Arabia are also developing in terms of volume and priority. Within Asia, India has bonded well with Malaysia, Vietnam and Indonesia and trade volume with these countries is anticipated to grow at around 11 per cent over the next five years.

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$ 287.62 billion for the week ended July 6, 2012. Foreign currency assets (FCAs), the biggest component of the forex reserves, aggregated to US$ 254.63 billion and the value of gold reserves stood at US$ 25.76 billion for the week. The value of special drawing rights (SDRs) was calculated at US$ 4.35 billion, and India's reserves with the International Monetary Fund (IMF) came out to be US$ 2.87 billion.

Foreign Direct Investment (FDI)

India received FDI worth US$ 1.33 billion in May 2012 while cumulative inflows for April-May 2012-13 stood at US$ 3.18 billion.

The sectors which attracted huge FDI inflows during the 2-month period of 2012-13 are: services (US$ 754 million), pharmaceuticals (US$ 401 million), metallurgical industries (US$ 314 million), construction (US$ 181 million), housing and real estate (US$ 132 million) and power (US$ 100 million).

Mauritius infused highest inflows worth US$ 1.13 billion, followed by Netherlands (US$ 409 million), the UK (US$ 378 million), Singapore (US$ 231 million), Japan (US$ 132 million) and Cyprus (US$ 177 million).

The Government has recently cleared 14 FDI proposals worth Rs 1,584.11 crore (US$ 281.64 million) based on the recommendations of Foreign Investment Promotion Board (FIPB).

Foreign Institutional Investments (FIIs)

FIIs have displayed intense optimism in India's growth prospects as the country remained relatively insulated from the global economic meltdown; thanks to strong domestic consumption, focus on infrastructure development and robust banking system.

According to a UN report, India is the third most favoured destination for investment after China and the US for major global companies. The report further anticipates that foreign investments in India could increase by more than 20 per cent in 2012-13.

  • According to data released by capital market regulator, the Securities and Exchange Board of India (SEBI), total FII investment in 2012 (till July 13, 2012) stood at US$ 9.82 billion wherein US$ 1.3 billion were infused during the first two weeks of July itself
  • During July 3-13, 2012 FIIs were gross buyers of shares worth Rs 24,626 crore (US$ 4.48 billion), while they sold equities amounting to Rs 17,270 crore (US$ 3.07 billion), translating into a net investment of US$ 1.3 billion
  • The foreign fund houses also infused US$ 309 million in the debt market in July 2012 taking the overall net investments by FIIs into debt markets to US$ 4.32 billion in 2012 (till July)
  • As on July 13, the number of registered FIIs in the country stood at 1,754 while the total number of sub-accounts was 6,358