investment, the sort of sticky long-term money India craves to fund its current
account deficit and build up its infrastructure, may not be so stable after
According to a
Nomura report, multinational companies have been pulling money out of India at
an accelerating rate, moving $10.7 billion out of the country in 2011, up from
$7.2 billion in 2010 and just $3.1 billion in 2009.
Outward flows are
bad news for a country that this week saw its rupee currency hit a new record
low as investors worry about its hefty fiscal and current account shortfalls,
slowing economic growth and policy gridlock.
funds continue to enter India even as existing investors exit. Inbound foreign
direct investment surged 88 per cent to a record $36.5 billion in the fiscal
year that ended in March, according to official data.
deleveraging may have forced companies to sell their Indian assets and repatriate
funds to their home country,” Nomura analysts wrote in the Friday note.
“At the same time,
domestic push factors such as slowing potential growth, the high cost of doing
business and regulatory uncertainty have weakened the investment climate, likely
causing this erosion. This is not a good sign.”
New York Life
recently exited its 26 per cent stake in an Indian insurance venture with Max
India for $530 million, while US mutual fund giant Fidelity Worldwide
Investment recently struck a deal to unload its India unit to local company
L&T Finance Holdings.
The Nomura report
said the services, manufacturing and real estate sectors probably saw “the
This would be
catastrophic and depress the demand in the manufacturing sector, the largest
employment source after agriculture and services, it said.
chamber hoped that RBI will take a balanced view when it reviews the credit
policy next month.