EAC presents outlook to Prime minister

The net Foreign Direct Investment into India at US $ 9 billion in this financial year would exceed the portfolio capital flows for the first time in several years, reports Aloke Tikku.

The net Foreign Direct Investment into India at US $ 9 billion in this financial year would exceed the portfolio capital flows for the first time in several years, the Prime Minister's Economic Advisory Council has said.

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The EAC, which presented an update on the country's Balance of Payments outlook for 2006-07 to Prime Minister Manmohan Singh on Thursday, said FDI inflow was expected to be around $ 12 billion this year and FDI outflow – Indian companies investing abroad – $ 3 billion, raising the net FDI from $ 4.7 billion last year to $ 9 billion this fiscal. The portfolio capital flows, in contrast, are likely to hover around $ 7 billion.

The council, headed by former RBI Governor C Rangarajan, also estimated the current account deficit at $ 13.4 billion amounting to 1.5 per cent of the GDP during 2006-07. The current account deficit was estimated at $ 6.5 billion for the first half of this fiscal, the Prime Minister’s Office said.

The net accretion to foreign exchange reserves by the end of this fiscal would be $ 22.6 billion compared to $ 15.1 billion last year. Nearly $ 8.6 billion has already been absorbed in the first half.

The council also noted the increasing global interaction of the economy, reflected in the increasing ratio of total trade to GDP from 32.8 per cent last year to 35.9 per cent this year. If software exports is also counted, this ratio further goes up to 39 per cent, the EAC reported.

Email Aloke Tikku: atikku@hindustantimes.com