Mumbai: The country's international investment position (IIP) has deteriorated during the June quarter as net claims of non-residents rose USD 12.6 billion to USD 346.6 billion following a sharper rise in the value of foreign-owned assets in the country vis-a-vis rise in the value of residents' financial assets abroad.
"Net claims of non-residents on the country, as reflected by the net IIP, rose USD 12.6 billion to USD 346.6 billion at the end of the June quarter from the previous quarter," the Reserve Bank has said.
This change in the net position shows a USD 22.9 billion increase in the value of foreign-owned assets in the country vis-a-vis a USD 10.4 billion increase in the value of residents' financial assets abroad, the RBI said.
However, the ratio of the country's international financial assets to international financial liabilities improved to 58.7 percent in the June quarter from 59.1 percent in the March quarter.
On an annual basis, the numbers deteriorated much faster as net IIP in June 2013 quarter stood at USD 313.4 billion, an increase of USD33.2 billion. In the September quarter of FY14, net IIP had stood at a USD 302.7 billion while the same was USD 318.8 billion in the December 2013 quarter.
Similarly, residents' financial assets abroad, too, rose USD 10.4 billion in Q1 to USD 492.8 billion from USD 482.4 billion in Q4 of FY14. On an annual basis, assets rose by USD 58.3 billion from USD 434.5 billion. This stood at USD 436.7 billion in Q2 of FY14 and at USD 458.9 billion in Q3 of FY14.
As per the RBI data, deterioration in net IIP was due to a sharper spike in the value of foreign-owned assets in the country vis-a-vis the increase in the value of residents' financial assets abroad.
The net IIP measured as financial assets of residents are claims on non-residents and gold/bullion held as reserve assets less financial liabilities of the residents to non-residents. The IIP shows the value and the composition of the financial assets of residents that are claims on non-residents, and gold/bullion held as reserve assets; and the liabilities of residents to non-residents.
On the composition of external financial assets and liabilities, RBI said the reserve assets continued to have the dominant share of 64.2 percent in the overseas financial assets, followed by direct investment abroad at 26.2 percent.
The share of direct investment stood at 29.8 percent, portfolio investment at 24.3 percent, loans at 21.5 percent, and currency and deposits at 12.7 percent. The share of non-debt liabilities rose marginally to 46 percent in Q1 from 45.5 percent in the previous quarter.
Commenting on the rise in the external debt, Icra chief economist Aditi Nayar said, "Data indicates moderation in vulnerability across a variety of external sector indicators, including external debt as a percentage of GDP, ratio of forex reserves to external debt and short-term external debt by residual maturity as a percentage of reserves."
She said the marginal rise in short-term debt (by USD 0.3 billion) indicates that redemption pressure in the immediate term has not intensified. Moreover, forex reserves were enhanced by a substantial USD 12 billion in the quarter.
The residents' financial assets abroad rose by USD 10.4 billion to USD 492.8 billion by as of the June quarter on a quarter-on-quarter basis, as there was an increase in reserve assets.
Reserve assets account for over three-fifths of total financial assets, and rose by USD 11.9 billion to USD 316.1 billion during the reporting period, according to RBI data.
Direct investment abroad rose marginally to USD 128.8 billion from USD 128.7 billion, while other investments abroad declined by USD 1.7 billion to USD 46.6 billion due to a fall in the stock of currency and deposits and loans.
The outstanding value of currency and deposits fell by USD 2.2 billion to USD 15.7 billion, the stock of loans declined by USD 1.8 billion to USD 5.1 billion, the apex bank data showed.
Meanwhile, foreign-owned assets rose USD 22.9 billion to USD 839.3 billion in June as stock of portfolio and direct investments rose. While stock of portfolio investments rose USD 10.6 billion to USD 203.7 billion, the stock of direct investments jumped USD 7.6 billion to USD 250.3 billion.
Other investment liabilities rose USD 4.8 billion to USD 385.3 billion as the stock of trade credit, loans and currency and deposits rose.
The share of debt liabilities in total liabilities declined marginally to 54 percent at the end of the June 2014 quarter from 54.5 percent in the preceding quarter. The overseas financial assets-to-liabilities ratio deteriorated to 58.7 percent from 59.1 percent a quarter ago.
