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CMIE: Forex inflows seen jumping 70 per cent to $91.3 bn this fiscal
November, 16th 2010

Leading macroeconomic research agency Centre for Monitoring Indian Economy (CMIE) has forecast capital flows topping $91 billion by the end of the fiscal, a staggering 70 per cent over $53.6 billion that the country received last fiscal.

"We expect the net capital inflows into the country touching $91.3 billion by the end of this fiscal and $68.8 billion by the end of the December quarter," CMIE said in its monthly review of the economy.

The agency's monthly macroeconomic report says this record spike is on the back of the massive inflow of $30.4 billion in the September quarter alone.

For the foreign funds looking for high returns, on the back of dirt-cheap funds from their homes markets, where returns are negligible, India and especially its stock markets have been the hot cake.

In September-October alone, they had pumped in nearly $13 billion into the domestic equities.

This record fund flows have been a cause for worry for the planners as a whole, and especially for Reserve Bank of India , which has been finding it difficult to contain the high inflationary pressures, mostly driven by abnormally high food prices, despite six consecutive rounds of rate hikes.

The WPI inflation in October inched down by a notch to 8.58 per cent from 8.62 per cent in the previous month, while food inflation though has been declining for the past four weeks, still remains elevated at 12.30 per cent for the week ended October 30.

The fear of currency volatility of the fast emerging markets is further compounded by the second quantitative easing of the US Federal Reserves, amounting to $600 billion more of money planning to pump into the tottering economy, as they fear that this would further fuel the capital inflows into these markets.

The report says portfolio investments are alone expected to be of $16.3 billion during the April-October period, while overall inflows are expected to top $28.5 billion during the period.

Foreign Direct Investment (FDI) is expected to be around $15.7 billion during the April-October period, which is $1.7 billion a month.

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