Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: articles on VAT and GST in India :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARDS :: TAX RATES - GOODS TAXABLE @ 4% :: TDS :: empanelment :: ACCOUNTING STANDARD :: list of goods taxed at 4% :: due date for vat payment :: form 3cd :: cpt :: VAT RATES :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: Central Excise rule to resale the machines to a new company
General »
 Banks warn share tax hike threatens Paris' post-Brexit appeal
 PMC may decide on property tax rebate for IT firms this week
 I-T Dept is giving out certificates of appreciation. Have you received yours?
 Government works on ironing out benefits refund mechanism for exportersa
  Tax officials are using an IDS provision to question transactions beyond six-year-limit
 Tax-free bonds rally like midcap funds
 Senior citizens do not have to pay advance tax on salary and interest income
 GST: Audit commissioners to get adjudication powers
 Interest on NRE rupee account can be exempt from tax under FEMA
 Impact of GST on Real Estate Sector
 GST regime: Tax payers allowed to take option of third-party interfaces

RBI: Capital inflows not sensitive to interest rate changes
June, 06th 2011

Foreign capital inflows are insensitive to interest rate changes in the country, according to a Reserve Bank of India (RBI) study. It said that a percentage point rise in interest rate results in just about 0.05 percentage points increase in net capital flows to India.

The RBI said domestic industrial and economic activity, stock return, performance of other advanced economies and overseas investors' risk perception is major factors that attract foreign capital. With this observation , RBI has put to rest the fears that a tightening monetary policy may slow down the net capital inflows in the country. Traditionally, FDIs and FIIs are two major components of foreign capital inflow and the study shows these two parameters are completely insensitive to interest rate changes.

These are primarily determined by India's growth prospects and returns on equities. During the 10-year period between 2000 and 2010, FDI and FIIs taken together accounted for two-thirds of India's total net capital inflows while the share became more skewed during 2009-10 at 93%.

The RBI said FDI inflows, which are essentially longterm in nature, grows as international investors become more confident about the growth prospect of the local economy.

Overseas institutional investors pumped in money in the local stock market attracted by the phenomenal rise in BSE Sensex. A 1% jump in Sensex led to 1.3 percentage point rise in cumulative FII inflows to the country's stock market, the study said. The two debt components of foreign capital - external commercial borrowings and NRI deposits - are, however, more sensitive to interest rate changes.

But while their weightage in the total net capital is significantly low, the exchange rate fluctuations also play a part in the flow of ECBs and NRI deposits. The study by research officer Radheshyam Verma and assistant adviser Anand Prakash, showed that one percentage point change in interest rate brings about 0.85% change in ECBs.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
E-catalogue online catalogue E-brochure online brochure online product catalogue online product catalogue e-catalogue Indi

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions