FPI outflow not India-specific phenomenon: Economic Survey

Playing down huge sell-off by foreign investors in Indian markets, the Economic Survey on Monday said FPI outflow last year was not an India-specific phenomenon as most emerging markets witnessed a pullout due to higher returns in advanced economies.

"The FPI outflow was not a phenomenon associated with Indian markets alone as FPIs pulled out of most EMEs (emerging market economies) in a big way due to higher returns in advanced economies," said the Economic Survey 2016-17, which was tabled by Finance Minister Arun Jaitley in Parliament.

Overseas investors turned negative on Indian markets in 2016 and pulled out Rs 23,079 crore, making it the first outflow since 2008 global financial crisis.

Surprisingly, it is the debt instruments that have taken the biggest hit while equities continued to attract net inflows but not enough to compensate the huge outflows from the bond market.

Foreign portfolio investments (FPI) pumped in a net sum of Rs 20,568 crore in equities while they withdrew a net Rs 43,647 crore from the debt market, translating into an outflow of Rs 23,079 crore.

"For the first time since the meltdown of 2008, net FPI has turned negative (implying that there was an outflow from the Indian markets to the tune of Rs 23,079 crore)," the Survey noted.

The decline in interest rates and the outlook triggered a large outflow of FPI amounting to USD 9.8 billion in November and December, with 60 percent of the decline accounted for by debt outflows.