Net overseas claims on India up $30.9 bn in Q4 FY17

Net claims of non-residents on India, based on the country's International Investment Position (IIP), increased by $30.9 billion during the quarter ended 31 March 2017 compared to the previous quarter.

During the quarter foreign-owned assets in India increased by $53.7 billion against a $22.8 billion increase in Indian residents' overseas financial assets, data released by the Reserve Bank of India (RBI) showed.

Indian residents' overseas financial assets exhibited an increase of $22.8 billion from the previous quarter, mainly due to an increase of $11.1 billion in reserve assets with the RBI, $5.5 billion in currency and deposits, and $4.1 billion in direct investment abroad.

Foreign-owned assets in India increased by $53.7 billion over the previous quarter, mainly due to increase of $24.2 billion in portfolio investments, $17.5 billion direct investment in India and $7.1 billion in currency and deposits.

Variation in the exchange rate of rupee vis-a-vis other currencies had a significant impact on the change in liabilities, when valued in dollar terms, as the rupee appreciated during the quarter by 4.6 per cent, RBI noted.

The ratio of India's international financial assets to international financial liabilities stood at 59.0 per cent in March 2017 (60.0 per cent in December 2016).

On an annual basis, overseas financial assets of Indian residents increased by $14.1 billion during the financial year 2016-17 on the back of a $6.6 billion increase in direct investment abroad and $9.8 billion increase in reserve assets, even as trade credit declined by $1.1 billion, RBI said.

Foreign owned assets in India increased by $47.5 billion during 2016-17 helped by fresh direct investment of $48.8 billion and portfolio investments of $13.9 billion.

Among other investments, loans and currency and deposits declined by $10.5 billion and $10.0 billion, respectively, during the year.

As a result, net claims of non-residents on India increased by $33.4 billion during the financial year 2016-17.

The ratio of total international financial assets to GDP (at current prices) declined to 24.2 per cent in March 2017 from 26.7 per cent a year ago. Reserve assets to GDP ratio moderated to 15.8 per cent in March 2017 from 17.5 per cent a year ago.

The ratio of total international financial liabilities to GDP dropped to 40.9 per cent in March 2017 from 44.2 per cent a year ago. The ratio of direct and portfolio investment liabilities to GDP stood at 14.6 per cent and 10.2 per cent, respectively, in March 2017.

The ratio of net IIP to GDP was (-) 16.8 per cent in March 2017.

Reserve assets continued to have the dominant share (65.4 per cent) in India's international financial assets in March 2017, followed by overseas direct investment (26.2 per cent).

Direct investment (35.7 per cent), portfolio investment (24.9 per cent), loans (16.7 per cent), and currency and deposits (12.2 per cent) were the major constituents of the country's financial liabilities.

The share of non-debt liabilities in international liabilities of Indian residents increased to 50.3 per cent as of end-March 2017 from 49.2 per cent at end-December 2016.

International Investment Position (IIP) depicts the value and the composition of financial assets of residents that are claims on non-residents (including gold bullion held as reserve assets) and liabilities of residents to non-residents. The difference between the country's external financial assets and liabilities is its net IIP, which is an important input for understanding external sustainability.