FII inflows: Foreign investors make $15 billion out of their India investments in Q3

Mumbai: Even as the economy slowed down following COVID-19 induced nation-wide lockdown, foreign investors took back home 30 per cent higher returns from their investments in India in Q3’2021.

Foreign investors took back home $15.07 billion as investment income during October-December’20 compared to $12.2 billion in the same period a year ago, according to the latest balance of payments data released by the Reserve Bank of India on Wednesday.

An analysis of the newer format of balance of payments data show that it is not returns on record portfolio flows during the quarter, but returns on FDI investments and servicing of bonds and NRI deposits that caused the surge in investment income outflows.

Of the $15.07 billion repatriated by foreign investors during the quarter only $1.9 billion is on account of profits out of portfolio investments, $3 billion was income from FDI investment, servicing of overseas bonds and NRI deposits during the quarter. ” Corporate have managed to earn higher profits in the quarter through cost cutting and various measures” said Madan Sabnavis, chief economist at

.” The same is true for MNCs who have likely to have repatriated these profits”

India has been witnessing strong foreign investment flows both through the FDI route as well as portfolio routes even during the pandemic. In Q3’2021 itself foreign investments amounted $38 billio- both FDI and portfolio flows included. This has also led to the Reserve Bank piling up record foreign exchange reserves, which are at around $582 billion as of March19’20. Going ahead, once could see more such outflows of profits from India. “Investments in India are increasing. As a result, primary income and dividend arising out of such income is also increasing” said Rahul Bajoria, chief India economist at Barclays Capital. “It is a side effect of such large outflows”.

The Reserve Bank has attributed the rise in current account deficit also to the surge in outflow of investment income. “Underlying the current account deficit in Q3:2020-21 was a rise in the merchandise trade deficit to $ 34.5 billion from $ 14.8 billion in the preceding quarter, and an increase in net investment income payments” RBI said in a release on Wednesday.