Capital flows may double to $33.9 bn in FY10: Morgan Stanley

Capital flows to India will almost double to $33.9 billion (Rs 1,59,003 crore) in the current financial year from an estimated $17.3 billion in 2008-09, riding on an improved sentiment for the country's economic growth, says financial services major Morgan Stanley.     

"We expect improvement in capital flows to $33.9 billion in FY2010 and $41.3 billion in FY2011 compared to $17.3 billion (estimated) in FY2009," Morgan Stanley economist Chetan Ahya said in a report.     

The report stated that decisive mandate in the elections in favour of Congress-led UPA has fueled hopes that the new government would bring in reforms which may help boost the country's economic growth.     

"The improved sentiment for the country's macro outlook driven by strong political mandate and economic reforms expectations should help India increase its overall share in capital flows allocated to emerging markets," the report added.     

Morgan Stanley report stated that in line with the deterioration in the global capital market environment, capital inflows into the country declined during the quarter-ended December 2007, despite the attractive long-term investment story.

Experts believe two key non-debt components of capital flows into the country — Foreign Direct Investment (FDI) and Portfolio investment or FII — are likely to increase in the current fiscal riding on hopes of economic reforms and an expected recovery in the global markets.     

The foreign institutional investment into the country's stock market has increased substantially with their net investments crossing the $4 billion mark (Rs 20,473.60 crore) in the first two months of FY10.     

Besides, the FDI inflows during 2008-09 (from April 2008 to March 2009) stood at Rs 1,22,919 crore ($27,309 million), according to the government data.     

Further, about 85 per cent of the total $207 billion capital flows that the country received over the four years ended March 2008 were in the form of less-stable non-FDI flows compared to the ratio of 31 per cent for other top 10 emerging markets.