A Brief Note On Capital And Finance Accounts Essay

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Capital/Finance account in 2013-14 Outcomes in 2013-14 were a mixed bag. The higher CAD in the first quarter of 2013-14 was financed to a large extent by capital flows; but the moderation observed in the fourth quarter of 2012-13 continued through 2013-14. The communication by the US Fed in May 2013 about its intent to roll back its assets purchases and market reaction thereto led to a sizeable capital outflow from forex markets around the world. This was more pronounced in the debt segment of FII. In the event, even though there was a drastic fall in the CAD in July-September 2013, net capital inflows became negative leading to a large reserve drawdown of US$ 10.4 billion in that quarter. FDI net inflows continued to be buoyant with steady inflows into India backed by low outgo of outward FDI in the first two quarters. In the third quarter, while there was turnaround in the flows of FIIs and copious inflows under NRI deposits in response to the special swap facility of the RBI and banks’ overseas borrowing programme, there was some diminution in the levels of other flows. This led to a reserve accretion of US$ 19.1 billion in the third quarter notwithstanding that the copious proceeds of the special swap windows of the RBI directly flowed to forex reserves of the RBI. In the fourth quarter, while FDI inflow slowed, higher outflow on account of overseas FDI together with outflow of short-term credit moderated the net capital inflows into India. Thus for the year as a whole,
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