New Delhi: Amid the fear of global economic slowdown, Reserve Bank of India Governor Shaktikanta Das on Thursday said that the Indian economy remains a preferred habitat for foreign direct investment (FDI).
“The Indian economy remains a preferred habitat for foreign direct investment (FDI) and is among the top 10 destinations for green-field projects,” he said.
While addressing the Bloomberg India Economic Forum 2019 in Mumbai, Das said that net foreign direct investment at US$ 18.3 billion in April-July 2019 was higher than US$ 11.4 billion in the corresponding period of 2018-19.
“A significant progress has been made in external debt management since the external payment difficulties encountered in 1990 which triggered wide-ranging structural adjustments and reforms,” he said.
Das said the level of external debt at 19.7 per cent of GDP and the debt service ratio (principal repayments and interest payments as a ratio of current earnings) at 6.4 per cent of GDP are among the lowest in emerging market peers.
“This places India among the least externally indebted countries of the world, by the World Bank’s classification,” he said.
Das said that the international environment is clouded with very challenging conditions as the global growth is slowing down and central banks across the world are bracing up to counter it by easing monetary policy.
“There is no recession as of now. Trade wars have pushed world trade into contraction and threaten to morph into tech and currency wars, with no evidence of any significant gains accruing to anyone,” he said.
Das said the global commodity prices have weakened with collateral benefits to net commodity importers and terms of trade losses for commodity exporters.
“The developments emanating from drone strikes on Saudi oil facilities are, however, still playing out. Sporadic flights to safety are driving capital flows out of emerging markets into advanced economy assets; but the universe of negative-yielding bonds is growing disconcertingly large, posing a potential threat to financial stability,’ he said.
Saying that India’s external sector has exhibited resilience and viability, Das said that the current account deficit has averaged 1.4 per cent of GDP over the last 5 years and remains comfortably financed in spite of global spillovers imparting risk-on-risk-off volatility to portfolio flows.
“The level of foreign exchange reserves was at US$ 429 billion on September 13, 2019, sufficient to cover close to 10 months of imports or 21 months of debt of residual maturity up to 1 year.” He said.