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Outsized capital inflows?

ajay shah's picture
Submitted by ajay shah on December 7, 2009 - 05:37

A lot of people are getting anxious about a scenario with outsized
capital inflows hitting India. The historical time-series is
illuminating:

Quarter Billion USD Percent to GDP
12/2004 12.6 7.4
03/2005 8.2 4.6
06/2005 5.8 3.4
09/2005 10.5 6.2
12/2005 0.8 0.4
03/2006 8.4 4.2
06/2006 10.7 5.7
09/2006 7.9 4.2
12/2006 10.8 4.8
03/2007 15.8 6.7
06/2007 17.8 7.4
09/2007 33.2 13.6
12/2007 31.0 10.7
03/2008 26.0 8.7
06/2008 11.1 4.0
09/2008 7.6 2.8
12/2008 -4.3 -1.6
03/2009 -5.3 -2.0
06/2009 6.7 2.7


In the latest quarterly data (Apr/May/June 2009), net capital inflows
worked out to $6.7 billion or 2.7% of GDP. These are not big numbers.

What are big numbers? 10% of GDP is a big number, which was breached
for six months in this history. At the time, this corresponded to above
$30 billion a quarter of net capital inflow. In future quarters, the
physical magnitude will depend on how big GDP is at the time. My rough
sense of 10% of GDP in the Oct-Nov-Dec 2009 quarter is that it will be
$30 billion. To get to these numbers, we'd need to get back to an
environment like Jul-Dec 2007 in terms of optimism about emerging
markets in general and India in particular. So far, this doesn't seem
to be what is in place.

Source : http://ajayshahblog.blogspot.com/


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