Net overseas claims on India declines to $296.9 billion as of end-June 2013

Net claims of non-residents on India, estimated on the basis on the country's international investment position, stood at $296.9 billion as of end-June 2013, a $12.5 billion decline from the previous quarter, data released by the Reserve Bank of India showed.

During the April-June 2013 quarter, the value of foreign-owned assets in India declined by $25.7 billion to $ 731.5 billion, while the value of Indian residents' financial assets abroad declined by $13.2 billion to $ 434.6 billion, resulting in a $12.5 billion decline in net overseas claims on India.

Reserve assets of the country decreased by $9.6 billion to $282.5 billion as of end-June 2013.

Direct investments and portfolio investments abroad remained almost unchanged from the previous quarter while other investments abroad decreased by $3.6 billion due to changes in loans and the value of currency and deposits.

Foreign direct investments and portfolio investments in India decreased by $13.8 billion and $13.7 billion, respectively, while trade credit, which comes under the category of other investment liabilities, increased by $2.4 billion.

Equity liabilities in dollar terms declined by $21.9 billion to $340.7 billion as of end-June 2013, from $362.6 billion at end-March 2013, due to the valuation effect resulting from rupee depreciation, though there was a positive flow of $11 billion into the Indian economy during the period.

Reserve assets continued to have a dominant share (65.0 per cent) in India's international financial assets as of end-June 2013, followed by direct investment abroad (27.5 per cent).

On the other hand, foreign direct investment (with share of 30.1 per cent), portfolio investment (23.3 per cent), loans and ECBs (22.8 per cent) were the major constituents of the country's financial liabilities.

The other investment component of liabilities - trade credit and currency and deposits - contributed 12.5 per cent and 9.8 per cent, respectively, to the country's financial liabilities.

The share of non-debt liabilities decreased to 46.6 per cent as of end-June 2013 from 47.9 per cent at end-March 2013.

An analysis of India's international investment position (IIP), which is a balance sheet analysis of international accounts, helps in understanding sustainability and vulnerability of economy's external sector.

The difference between India's external financial assets and liabilities, which stood at $296.9 billion as of end-June 2013, clearly shows it is unsustainable against the country's net foreign reserve assets of $282.5 billion.