According to the FDI data released by Reserve Bank of India (RBI) on 10 August 2012, Foreign Direct Investment (FDI) inflow in India declined to 5.4 billion dollar in the April-June quarter of fiscal 2012-13. The figure stood at 12.2 billion dollar during the same period of fiscal 2011-12.
On a cumulative basis FDI flows into India registered a fall of 53 percent as it was estimated at 7.7 billion dollar in the first quarter of the financial year 2012-13 compared to 16.3 billion dollar during the corresponding period of previous year.
Overall foreign investment, however, remained on positive trajectory with inflows estimated to have declined nearly 83 percent to 2 billion dollar, compared to 11.6 billion dollar in April-June 2011.
With poor show on investment front and higher trade deficit, India’s balance of payment is likely to aggravate further. As per the RBI data released on Balance of Payment for the last quarter of fiscal 2011-12, the trade deficit exceeded 50 billion dollar (10.6 per cent of GDP) and current account deficit rose to 21.7 billion dollar (4.5 per cent of GDP).
Current Account Deficit (CAD)
India’s current account deficit (CAD) was at 30-year record high of 4.2 per cent of the GDP in 2011-12. CAD occurs when country’s total imports and transfers exceeds its total exports and transfers. High level of CAD leads to the deterioration in the value of a currency, while it also hurts the economy.
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