Foreign investments and their macro effects
Reserve Bank of India is reported to have suggested fiscal measures for boosting returns from foreign investments by resident businesses. This includes tax exemptions for dividend payouts, among others. The central bank should have been alert earlier.
The first warning note came in 2010-11 when the deficit on investment income — a component of the current account representing interest receipts and payments
on financial assets and liabilities along with dividend on corporate stocks — suddenly expanded 2.6 times over 2009-10s. Receipts fell 34%, while repayments
(outflows) rose 26%.
From then on, average receipts are 40% lower than the preceding three-year average (2008-10) while repayments are 26% higher in corresponding terms. In the current year, income earned from investments abroad is just one-third of that earned by foreign firms in India ($15.5 billion). Read More