Capital flows (net) moderated sharply from US$ 65.3 billion in 2011-12 and US$ 92.0 billion in 2012-13 to US$ 47.9 billion in 2013-14Capital flows (net) moderated sharply from US$ 65.3 billion in 2011-12 and US$ 92.0 billion in 2012-13 to US$ 47.9 billion in 2013-14 . This moderation in levels essentially reflects a sharp slowdown in portfolio investment and net outflow in ‘short-term credit’ and ‘other capital’. However, there were large variations within quarters in the last fiscal, which is explained partly by domestic and partly by external factors. In the latter half of May 2013, the communication by US Fed about rolling back its programme of asset purchases was construed by markets as a sign of imminent action and funds began to be withdrawn from debt markets worldwide, leading to a sharp depreciation in the currencies of EMEs. Those countries with large CADs saw larger volumes of outflows and their currencies depreciated sharply. As India had a large trade deficit in the first quarter, these negative market perceptions led to sharper outflows in the foreign institutional investors (FIIs) investment debt segment leading to 13.0 per cent depreciation of the rupee between May 2013 and August 2013.current-affairs/2014-07-10/economy/676
Posted on: Thu, 17 Jul 2014 09:19:23 +0000
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