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While Foreign Direct Investment (FDI) inflows have continued to exhibit accelerated growth (US $ 16.7 Billion during April-August 2008 as compared with US $ 8.5 Billion in the corresponding period of 2007), portfolio investments by Foreign
Institutional Investors (FIIs) witnessed a net outflow of about US $ 6.4 Billion in April-September 2008 as compared with a net inflow of US $ 15.5 Billion in the corresponding period last year.

Similarly, external commercial borrowings of the corporate sector declined from US $ 7.0 Billion in April-June 2007 to US $ 1.6 Billion in April-June 2008, partially in response to policy measures in the face of excess flows in 2007-08, but also due to the current turmoil in advanced economies. With the existence of a merchandise trade deficit of 7.7 per cent of GDP in 2007-08, and a current account deficit of 1.5 per cent, and change in perceptions with respect to capital flows, there has been significant pressure on the Indian exchange rate in recent months. Whereas the real exchange rate appreciated from an index of 104.9 (Base 1993-94=100) (US $ 1 = Rs. 46.12) in September 2006 to 115.0 (US $ 1 = Rs. 40.34) in September 2007, it has now depreciated to a level of 101.5 (US $ 1 = Rs. 48.74) as on October 8, 2008.

* Data on FIIS presented in this table represent inflows into the country and, thus, may differ from data relating to net investment in stock exchanges by FIIs.

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* Contributed by: -
Sunil Kumar Panda,
PGDBM, 1st Semester,
Fortune Institute of International Business, New Delhi.
Article posted on Fenruary 14, 2009.