Minister of State for Finance Jayant Sinha has said that the decline in the level of foreign portfolio investments (FPIs) flows may not have a significant macroeconomic impact as long as capital inflows remain enough to finance the current account deficit (CAD).
Sinha further said that the FPI through its impact on the cost of capital helps supplement domestic resources and thereby growth momentum. It also helps finance the level of current CAD and has implications for the exchange rate. However, a larger than required flow in either direction tends to impact exchange rate and hence to be modulated by the RBI through intervention.
During the first eight months of the current fiscal, foreign portfolio investments had pulled out a sum of Rs 7,008 crore from the country's capital markets after investing staggering funds in the preceding two financial years. In the year 2014-15, FPIs had made a net investment of Rs 2.77 lakh crore and Rs 51,649 crore in 2013-14.