News: NRIs, MNCs, lenders make a cool $10bn from India
(TNN 03/04/2006) Mumbai - It’s not just FIIs who are making money out of India. What often gets overlooked is that MNCs, foreign lenders and the Indian diaspora have together earned a mindboggling $10bn from the country in ‘05. This is the highest they have earned so far out of India in a single year.
Amid spiralling growth, money flowed out as dividend on stock holdings, interest payments by India Inc and returns given by banks on foreign currency deposit.
Even after excluding $1.5bn as interest expense on the India Millennium Deposit, the return that overseas institutions and NRIs earned on their exposure to India is around $8bn — a new high.
Even in the best year, their combined earnings from India did not cross $7.3bn, according to RBI data. This is inevitable as demand for money grows, and corporates fish around for cheaper funds abroad.
The huge external commercial borrowings (ECB) by Indian firms will result in interest payments to lenders abroad.
On the other hand, decent corporate earnings in ‘04-05 led to dividend income to foreign shareholders and parent MNCs.
Under the balance of payments classification, the ‘outflow on account of return on investments’ or investment income comprises payment of interest on NRI deposits, payment of interest on loans from non-residents, payment of dividend/profit to non-resident shareholders, reinvested earnings, payment of interest on debentures, fixed deposits, government securities etc.
The RBI, however, does not give the detailed breakup of outflow under these heads. The data for past years shows that more than the dividend earned on equity investments in India — either through FDI or FII route — servicing of debt (NRI deposits and loans by foreigners) accounted for the bulk of the outflow. For instance, more than half the outflow has been on account of interest payments under this head.
The RBI data indicates that three items — interest payments on foreign currency loans, interest payment on NRI deposits and reinvested earnings by MNCs — together comprise close to 85% of such outflow with their respective shares at 43%, 20% and 25% each in ‘03-04.
For almost a decade, ECB has emerged as a popular fund raising route for Indian corporates. India Inc borrowed as much as $10bn through ECBs in ‘04.
With the government gradually liberalising the access to the ECB market, more and more companies preferred the overseas markets to the domestic banking system.
So much so that there has been regulatory concern that the route has been used to bring back money taken out in the past through irregular transactions. If the current trend is any indication, the outflow on account of ECB interest servicing will grow this year and the next.
Amid spiralling growth, money flowed out as dividend on stock holdings, interest payments by India Inc and returns given by banks on foreign currency deposit.
Even after excluding $1.5bn as interest expense on the India Millennium Deposit, the return that overseas institutions and NRIs earned on their exposure to India is around $8bn — a new high.
Even in the best year, their combined earnings from India did not cross $7.3bn, according to RBI data. This is inevitable as demand for money grows, and corporates fish around for cheaper funds abroad.
The huge external commercial borrowings (ECB) by Indian firms will result in interest payments to lenders abroad.
On the other hand, decent corporate earnings in ‘04-05 led to dividend income to foreign shareholders and parent MNCs.
Under the balance of payments classification, the ‘outflow on account of return on investments’ or investment income comprises payment of interest on NRI deposits, payment of interest on loans from non-residents, payment of dividend/profit to non-resident shareholders, reinvested earnings, payment of interest on debentures, fixed deposits, government securities etc.
The RBI, however, does not give the detailed breakup of outflow under these heads. The data for past years shows that more than the dividend earned on equity investments in India — either through FDI or FII route — servicing of debt (NRI deposits and loans by foreigners) accounted for the bulk of the outflow. For instance, more than half the outflow has been on account of interest payments under this head.
The RBI data indicates that three items — interest payments on foreign currency loans, interest payment on NRI deposits and reinvested earnings by MNCs — together comprise close to 85% of such outflow with their respective shares at 43%, 20% and 25% each in ‘03-04.
For almost a decade, ECB has emerged as a popular fund raising route for Indian corporates. India Inc borrowed as much as $10bn through ECBs in ‘04.
With the government gradually liberalising the access to the ECB market, more and more companies preferred the overseas markets to the domestic banking system.
So much so that there has been regulatory concern that the route has been used to bring back money taken out in the past through irregular transactions. If the current trend is any indication, the outflow on account of ECB interest servicing will grow this year and the next.
posted by InCar Group Press Room at 12:00
1 Comments:
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