Lok Sabha Question No. 2177 (UNSTARRED), answered on 2016-05-06
Subject: Moody's Rating of 'Make in India' Initiative
Ministry: FINANCE
Asked by: SUMEDHANAND SARASWATI

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA

Unstarred Question No. 2177

Friday, May 6, 2016

## Moody's Rating of 'Make in India' Initiative

## 2177:  SHRI SUMEDHANAND SARSWATI:

Will the Minister of FINANCE be please to state:

- a) whether many international credit rating agencies including Moody's have called Government's 'Make in India' initiative a success;
- b) if so, the facts thereof and the reaction of the Government thereto;
- c) whether FDI inflows hit more than financing the Current Account Deficit (CAD) for the first time since 2004;
- d) if so, the details thereof; and
- e) the details of the foreign reserves during each of the last three years?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI JAYANT SINHA)

(a) & (b) Moody's Investors Service in its Report titled 'Government of India: Rising Foreign Direct Investment Provides Stable Financing of Current Account Deficit,  a  Credit  Positive'  which  was  released  on  7 th April,  2016  has  made following observations:-

'The  rise  in  FDI  points  to  stronger  investor  interest  in  India  on  the  back  of robust  economic  growth.  Higher  inflows  also  suggest  that  recent  government policies, such as efforts to liberalize foreign investment limits in several sectors and the 'Make in India' initiative, are bearing fruit.'

This report is a reflection of growing international recognition of the Government's policy of giving a boost to the manufacturing sector through the 'Make in India' initiative.

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(c) & (d) The level of Foreign Direct Investment (FDI) and Current account Deficit (CAD) since 2004-05 are given in the table 1 below.

Table: 1 Foreign Direct investment and Current Account Deficit on Balance of Payments basis (US$ million)

| Year                | Foreign Direct Investment   | Foreign Direct Investment   | Foreign Direct Investment   | Current Account Deficit   |
|---------------------|-----------------------------|-----------------------------|-----------------------------|---------------------------|
| Year                | Inflows                     | Outflows                    | Net                         | Net                       |
| 2004-05             | 6087                        | 2374                        | 3713                        | -2470                     |
| 2005-06             | 9178                        | 6144                        | 3034                        | -9902                     |
| 2006-07             | 23590                       | 15897                       | 7693                        | -9565                     |
| 2007-08             | 37322                       | 21429                       | 15893                       | -15738                    |
| 2008-09             | 43006                       | 20634                       | 22372                       | -27914                    |
| 2009-10             | 38484                       | 20518                       | 17966                       | -38181                    |
| 2010-11             | 38609                       | 26775                       | 11834                       | -48053                    |
| 2011-12             | 49007                       | 26947                       | 22061                       | -78155                    |
| 2012-13             | 39786                       | 19967                       | 19819                       | -88163                    |
| 2013-14             | 43582                       | 22018                       | 21564                       | -32397                    |
| 2014-15             | 51796                       | 20544                       | 31251                       | -26800                    |
| 2015-16 (Apr.-Dec.) | 43906                       | 16469                       | 27437                       | -21975                    |

Source: Balance of Payments, Reserve Bank of India

It  may  be  seen  that  the  FDI  Net  inflows  have  managed  to  cover  up  the Current Account Deficit (CAD) in the FY 2007-08 and thereafter since the year 2014-15.

- (e) India's  foreign  exchange  reserves  comprise  of  foreign  currency  assets  (FCAs)  of  RBI, Gold,  SDRs  and  reserve  tranche  position  (RTP)  with  IMF.  The  level  of  foreign  exchange reserves is largely the outcome of Reserve Bank of India's intervention in the foreign exchange

market to stabilise the rupee value. The level of foreign exchange reserves during the last three years are given in the table 2 below.

Table: 2 India's Foreign Exchange Reserves (US$ million)

| End of Financial Year   |   Foreign Currency Assets |   Gold |   RTP |   SDRs | Total     |
|-------------------------|---------------------------|--------|-------|--------|-----------|
| 1                       |                         2 |      3 |     4 |      5 | 6=2+3+4+5 |
| 2013-14                 |                    276359 |  21567 |  1834 |   4464 | 304223    |
| 2014-15                 |                    317324 |  19038 |  1292 |   3985 | 341638    |
| 2015-16                 |                    336104 |  20115 |  2456 |   1502 | 360176    |
| As on 22 April 2016     |                    337537 |  20115 |  1498 |   2451 | 361601    |

Source: Reserve Bank of India

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