Reserve Bank of India Governor Repo Rate Hike Disappoints India Inc

IndusView, Friday 20 September 2013 (London): India’s central bank Governor Raghuram Rajan today raised the benchmark interest rate by a quarter point to 7.5%, the first increase since 2011.

The move came as a surprise to most economists, who were widely expecting the Reserve Bank of India (RBI) to leave the rate unchanged. The cash reserve ratio was left unchanged.

Mr. Rajan, a 50-year-old former International Monetary Fund chief economist, is determined to build the bank’s inflation-fighting credentials, with the bump in borrowing costs coming amid the weakest economic growth since 2009. Rajan acted even after the Federal Reserve’s decision two days ago to maintain U.S. monetary stimulus eased pressure on the rupee, which has tumbled since May.

“ Given that growth in the economy is at a low point, business confidence is weak and the investment cycle has come to a grinding halt, I expected the new RBI governor to initiate measures that would enthuse the market participants, boost investor sentiment and bring confidence back in the economy” said Rangar. “A repo rate cut was needed to facilitate industrial production process and to gain in the international markets by enhancing exports scenario.”

To ease liquidity, the marginal standing facility rate, at which banks borrow from the RBI, was cut to 9.5% from 10.25% and the minimum daily maintenance of the cash reserve ratio was lowered to 95%.

The RBI's decision surprised the stock markets and the benchmark S&P BSE Sensex ended 383 points lower.

India Inc expressed its disappointment, as a rate cut by the bank would have helped ameliorate sentiments as businesses are struggling under a tight liquidity crunch due to high cost of capital.

“The government needed to be more proactive and just showed that fighting inflation is its core priority,” said Bundeep Singh Rangar, Chairman of London-based advisory firm IndusView. “So far, all the actions taken have been to contain a crisis and not to prevent it”.

International investors have withdrawn nearly $12 billion in shares and debt from India's markets since the beginning of June.

India's economic growth rate slipped to a decade low of 5% in 2012-2013 on account of poor performance of farm, manufacturing and mining sectors. It is projected to rise to 5.7% in the 2013 fiscal year and firm to 6.5% and 6.7% in 2014 and 2015, respectively.

Policymakers have consistently struggled to come up with steps that can convince markets they can stabilize the rupee and attract funds into the country despite extraordinary measures last month by the central bank to drain liquidity and action to curb gold imports and cut India's huge oil import bill.

Big Indian Groups Frame New Plans for U.S. Market

Foreign direct investment (FDI) is a hot-button subject in India today. Everybody — from Prime Minister Manmohan Singh to the average man or woman on the street — has a view on how to make the country more attractive for fund flows. Bolstering FDI is especially critical now because the current account deficit (CAD) is at a threatening level and could push the country into the sort of crisis it faced 25 years ago when India had to hawk its gold and seek assistance from the International Monetary Fund. During 2012-2013, CAD stood at $87.8 billion (4.8% of GDP) as compared with $78.2 billion (4.2% of GDP) during 2011-2012.

But the FDI that is being looked at most closely by executives is not the money coming but the money going out. After two years of trying to reignite India’s economy — GDP growth has fallen from 8%-9% in recent years to barely 5% now — cross-border takeovers are back on the radar.

The numbers indicate that a nadir of sorts has been reached. “The total value of outbound deals in the first quarter of 2013 was $0.19 billion (21 deals) compared to $0.69 billion (26 deals) during the first quarter of 2012,” says Bundeep Singh Rangar, chairman of IndusView, a consultancy for multinationals seeking to enter the Indian market. “I believe that M&A deal activity should pick up.”

Anecdotal evidence bears out his conviction. The Aditya Birla Group has a reserve of $1 billion to set up a chemical or fertilizer plant in the U.S. A team has been dispatched to America to evaluate the firm’s options. “We have been looking at an investment in the U.S. as there is enough cheap gas,” Aditya Birla Nuvo managing director Rakesh Jain told Indian economic daily Business Standard. “So, like a lot of Indian chemical companies, we are looking at the country for investment in the next few months.” Aditya Birla Nuvo is part of the Aditya Birla Group, a $42 billion Indian multinational operating in 36 countries in six continents. More than 50% of the group’s revenues come from overseas operations. Another group company, Novelis, the Atlanta-headquartered aluminum major acquired by Birla for $6 billion in 2007, is also spending $1 billion on expansion.

At the Reliance group, which has annual revenues more than $66 billion, U.S. shale gas is the target segment. The company had set up three joint ventures with Chevron, Pioneer and Carrizo in 2010. “Today, we are among the largest foreign investors in this business, with investments exceeding $5.7 billion on March 31,” chairman Mukesh Ambani said during the company’s recent annual general meeting. ”All three [joint ventures] are now operational and we are selling into competitive markets in Pennsylvania and Texas.” The plan is to invest another $5.1 billion in the next three years. This will take total investment above the $10 billion mark.

At the $100 billion Tata group, which is India’s largest and has overseas revenues of 58%, brand-building is getting top priority. The Tatas were recently ranked the most valuable Indian brand by Interbrand India in its first ever rating exercise for the country. But at an international level, the 145-year-old group has a long way to go. The U.K.-based Brand Finance puts them 39th in the pecking order.

According to United Nations Conference on Trade and Development (UNCTAD) data, Tata companies have a decent sprinkling in the Top 100 non-financial transnational corporations from developing and transition economies. The Indian companies on this list are Tata Steel at 22, Tata Motors at 23, Bharti Airtel at 31, Oil & Natural Gas Corporation at 44, Hindalco (Aditya Birla group) at 51, Tata Consultancy Services at 71, Suzlon at 84 and Reliance Industries at 99. The list is led by Hutchison Whampoa of China (Hong Kong). “The Tata group is preparing a blueprint to promote the Tata brand globally and has identified the U.S., Europe and Africa as areas of focus,” according to Business Standard.

The Tatas are already aware of the importance of branding abroad. In October 2010, the Tata trusts and companies gave Harvard Business School a gift of $50 million, the largest from an international donor in the school’s history, to set up a Tata Hall for executive education. The unstated objective was to become a familiar name to Harvard grads.

Yet another player, the New Delhi-based Bharti Airtel, a global telecommunications company with operations in 20 countries across Asia and Africa, came into the spotlight when it took over the African assets of the Kuwait-based Zain group for $10.7 billion in 2010. It has now spread further to Bangladesh and is hoping to get a toehold in Myanmar.

The difference today from the outbound mergers & acquisitions of the past two years is that India’s largest companies are again getting into the act. After Jaguar Land Rover (Tata Motors), Corus (Tata Steel), Novelis (Aditya Birla group) and Zain (Bharti), there was a pause in the billion dollar-plus acquisitions. But smaller players have been active in sectors such as fast moving consumer goods. A recent study by the Indian School of Business and Brazilian business school Fundação Dom Cabral found that the successful route for growth of Indian transnational corporations will be through overseas takeovers.

“FDI outflows from India reached their peak of $20 billion in 2007 and have since declined,” the UNCTAD reported. “Indian TNCs are active acquirers in developed countries such as the U.K. and the U.S. Indian IT service providers have long been important players in M&A markets. In recent years, firms from service industries such as banking and food services have become increasingly active in overseas markets.”

“We have come to the middle of yet another turbulent year,” notes Harish H.V., a partner with the India Leadership Team at Grant Thornton. “We seem to be in for an interesting second half…. As always, in a turbulent environment we see an active M&A scenario.”

India Finds Price Of Expats' Patriotism Elusive As Growth Fades

(Reuters) - The patriotism of wealthy overseas Indians has helped the country avert economic crises in the past and it is little surprise that embattled policymakers are turning to them again to plug a record trade gap that is battering the rupee.

This time, though, big investors among the more than 25-million overseas Indian community - the world's second-largest diaspora - are staying away as the economic outlook darkens and political instability looms ahead of national elections.

Shoring up inflows from the overseas Indians is a key weapon in Finance Minister P. Chidambaram's arsenal to prop-up the rupee that has lost 20 percent against the dollar so far this year and which dropped to a record low on Wednesday.

The rupee's crash has boosted remittances, mainly from blue-collar workers overseas - particularly in the Gulf - who can get more rupees for hard currency. However, it has not triggered a surge in high-value investments in real estate, private equity funds and stock markets, bankers and wealth managers said.

Underlining the hesitancy, flows from non-resident Indians (NRIs) into bank deposits in the April-June quarter dropped to $5.5 billion from $6.6 billion a year-earlier, central bank data shows.

Investments in real estate by overseas Indians dropped about 30 percent in the fiscal year that ended in March, according to the Confederation of Real Estate Developers' Associations of India (CREDAI), an umbrella group of local property developers.

"People feel like there are too many unknowns. The most recent government has been ghastly, and nobody quite knows what comes after it. I haven't been optimistic about India for quite a while," said Vasant Prabhu, chief financial officer of Starwood Hotels & Resorts Worldwide Inc (HOT.N) in New York.

"What makes it hard, you don't know what the bottom of the rupee is," he said in comments underscored by a rupee that stumbled from 63 per dollar on Friday to almost 69 per dollar on Wednesday - a sharp move over such a short period of time for a currency.

His comments were echoed by wealth managers and bankers in Britain, the United States and India who said non-resident Indian clients saw too many uncertainties despite the tantalising prospect of buying assets with a record-low rupee.

Economic growth is at its weakest in a decade and seen slowing further, New Delhi is struggling to close a record deficit in the current account - the broadest measure of a country's international trade - and a national election that must be held by May could tempt the government to spend to win over voters and so undermine its fiscal discipline.

In addition, emerging markets are losing favour with investors generally as the prospect of the United States reining in its economic stimulus draws cash into U.S. assets.

In a bid to attract funds, India liberalised bank deposit schemes and some banks raised rates for overseas Indians this month. They could secure interest rates of more than 8.5 percent on one-year rupee deposits and as much as 10 percent on three-year accounts, a relatively high return compared with many other countries where rates remain near historic lows.

"All these folks always had this strong belief that India is the safest country to invest and four, five years back when the rest of the world was collapsing India was still growing," said Anish Behl, head of wealth and strategy at lender IndusInd Bank (INBK.NS), referring to the global financial crisis.

"That mood has changed now," he said. "I can certainly feel that some NRIs are looking at dollar-based products from international stables ... they are very wary of pure rupee products."

LARGE HIT

The government goes out of its way to tug at the heartstrings of white-collar expatriates, such as those in Silicon Valley and at top investment banks in London, to raise funds and cushion the impact of slowing institutional inflows. There is even a ministry for Overseas Indian Affairs which has NRI investment as a core goal.

New Delhi has managed to lure them in the past with attractive deposit schemes and bonds. It issued a five-year Resurgent India Bond in 1998, raising more than $4 billion, and in 2000 it raised $5.5 billion through a deposit scheme.

India, Asia's third-largest economy, was the top recipient of remittances from diaspora in 2012 with about $70 billion, followed by China at $66 billion, World Bank figures show. India received about $63 billion in remittances in 2011.

Banks, including RBS (RBS.L), Barclays (BARC.L) and Morgan Stanley (MS.N), beefed up their teams in cities like New York, Singapore, Dubai and Hong Kong in recent years to advise overseas Indians on investment opportunities back home.

But many investors are now staring at losses as the rupee's plunge since May has wiped out gains they made on investments in private equity funds and mutual funds in the last few years.

"For people who are dollar-invested, that's a large hit," said Ajay Kaisth, principal of New Jersey-based Kai Advisors, which has $30 million under management, of which more than 60 percent is from Indian clients.

After trading broadly around 45 per dollar in 2010 and 2011, the rupee has dropped more than 30 percent.

LOSING FAITH

The economy is likely to grow even more slowly in fiscal 2013/14 (April-March) than the decade-low of 5 percent struck the previous year, as investment will stay weak due to a dearth of reforms and uncertainty ahead of the election, a Reuters poll showed.

The rupee has become the worst performer by far among Asian emerging-market currenciestracked by Reuters, despite frantic attempts by the government and central bank to support it.

Lalit Kumar Jain, chairman of CREDAI said property purchases by Indian expatriates were now needs-based rather than speculative, reducing what has been in the past a key type of demand.

As a portfolio investment destination, India also faces daunting competition as developed markets, including the United States, show signs of finally emerging from the global financial crisis, said Bundeep Singh Rangar, who advises individuals as well as companies on India investments as chairman of London-based IndusView Advisors.

"And that's a cause of concern because the biggest champion of India is its diaspora, and if they are losing faith you can imagine how much the non-Indian investor would be losing faith."

(The story corrects name in 13th paragraph to Anish from Anil)

(Additional reporting by Suvashree Dey Choudhury; Editing by John Chalmers and Neil Fullick)

Measures Taken By The Indian Government To Stem Rupee Fall

IndusView, Thursday 29 August 2013 (London): The Indian government is taking steps to stem the fall of the rupee, which has lost about 20% of its value this year.

The Indian government has approved infrastructure projects worth $28.4 billion to revive the economy and boost the falling rupee. Finance Minister P Chidambaram said 36 stalled projects in oil, gas, power, road and railways sectors were cleared.

The Reserve Bank of India (RBI) also unveiled plans to bolster the currency by lending dollars to state-backed oil groups. The central bank said it would use swap agreements to sell dollars to three companies, Indian Oil, Bharat Petroleum and Hindustan Petroleum, as part of a plan to fund oil imports.

A number of Indian banks have started increasing interest rates on non-resident Indian (NRI) fixed deposits with long-term maturities to attract foreign currency. Federal Bank, Axis Bank and IDBI Bank have joined Karnataka Bank and Dena Bank, who have already raised their rates for non-residence external (NRE) fixed deposits following the liberalisation of the same by the RBI.

“India’s secret weapon is its 25 million strong overseas diaspora who sent twice as much money into India last year than FDI and FII combined,” said Bundeep Singh Rangar, Chairman of London-based advisory firm IndusView. “$70 billion in annual remittances by Non-Resident Indians (NRIs) provides India with a distinct advantage over other BRIC economies, which is expected to increase to about $80 billion this year with the rupee depreciation.”

India’s dependence on foreign capital is also high and has risen sharply. The current-account deficit soared to almost 7% of GDP at the end of 2012, although it is expected to be 4% to 5% this year. External borrowing has not risen by much relative to GDP—the ratio stands at 21% today—but debt has become more short-term, and therefore riskier.

“A cheaper rupee will also encourage exports and discourage imports,” said Rangar. “If investment and exports begin to surge again, business confidence will return; that’s when the rupee will strengthen.”

           The rupee has lost about 20% of its value this year and is one of the world's worst performing currencies. India's currency has also been hurt by a range of other factors, not least the country's burgeoning current account deficit.

“The government needs to be more proactive,” added Rangar. “So far, all the actions taken have been to contain a crisis and not to prevent it”

India's current account deficit, which stood at 4.9% of the GDP in calendar year 2013, was the third highest in the world in terms of absolute numbers. At $98 billion, India's current account deficit in absolute numbers stood behind only the US ($473 billion) and the UK ($106 billion).

“A widening deficit not only puts a strain on the nation's foreign exchange reserves and but also indicates that it may need to borrow more money,” said Rangar. “That has triggered fears that India may not be able to trim its deficit.”

India imports almost 80% of its oil and there are concerns the higher prices will lead to higher inflation and a worsening of India's deficit.

The Wholesale Price Index, India's most closely watched inflation gauge, dropped to 4.7% in May on an annual basis, down nearly two-tenths of a percentage point from its 4.89% level in April. The broadly based wholesale price inflation reading, the lowest since late 2009, was well below market forecasts of a 4.9% rise.

A slowdown in India's growth rate - which has hit its lowest level in a decade - has also hurt investor confidence. International investors have withdrawn nearly $12 billion in shares and debt from India's markets since the beginning of June.

India's economic growth rate slipped to a decade low of 5% in 2012-2013 on account of poor performance of farm, manufacturing and mining sectors. It is projected to rise to 5.7% in the 2013 fiscal year and firm to 6.5% and 6.7% in 2014 and 2015, respectively.

Policymakers have consistently struggled to come up with steps that can convince markets they can stabilize the rupee and attract funds into the country despite extraordinary measures last month by the central bank to drain liquidity and action to curb gold imports and cut India's huge oil import bill.

The RBI Holds Key Interest Rate for Q1 2013-2014 Review

The Reserve Bank of India (RBI) has today kept its key interest rate steady at 7.25%, in line with expectations, due to continued concern with high current account deficit (CAD).

The wholesale price index, India's main inflation gauge, rose 4.86% in June, compared with 4.70% in May. Consumer inflation, which gives more weight to food prices than wholesale data, accelerated to 9.87% in June from 9.31% in the previous month.

The Indian rupee plunged to fresh record low of 61.21 earlier this month, against the US dollar, in trade on sustained dollar demand in the local market.

“A weak rupee exposes the country to external shocks, given the fact that India is largely dependent upon capital inflows to fund its important current account deficit,” said Bundeep Singh Rangar, Chairman of London-based IndusView. “The rupee has fallen about 10% against the dollar since early May, which is pushing up import costs and could feed price pressures in the coming months.”

India’s CAD hit a record $87.8 billion or 4.8% of the gross domestic product (GDP) last fiscal, up from $78.2 billion or 4.2% in the year before.

With crude oil price in the vicinity of $100 or more to a barrel, the government is hoping that a 10%-12% easing of crude oil prices will help the reducing the burden on the CAD. India imported crude oil worth $140 billion in 2011-12. India imports nearly 70% of its crude oil requirement, which has a direct impact on the rising CAD.

The RBI has cut its main lending rate by three quarters of a percentage point in 2013. Industry lobby groups and the government want it to bring the rate further down to support economic growth that slowed to its weakest pace in a decade at 5% in the fiscal year ended on March 31.

“The priority for monetary policy now is to restore stability in the currency market so that macro-financial conditions remain supportive of growth,” said Rangar. “ This strategy can succeed only if reinforced by structural reforms to reduce the CAD and step up savings and investment”.

Overseas investors have pulled out more than $754 million from the Indian debt market in the first week of this month amid concerns over depreciating rupee.

To check imports of non-essential goods that are adding to the already rising Current Account Deficit (CAD), the government has constituted a committee to be headed by Rajat Bhrargav, joint secretary (Budget) in the Ministry of Finance. The committee has been mandated to look into non-essential items in India’s import list so that these could be pruned to ease India’s CAD. Non-essential goods comprise luxury cars, cosmetics, certain exotic foods and beverages, gold, silver and foreign alcohol, among others.

Reserve Bank of India Holds Key Interest Rate Due to Inflationary Risks

IndusView, Monday 17 June 2013 (London): The Reserve Bank of India (RBI) has today kept its key interest rate steady at 7.25%, in line with expectations, due to continued concern with inflation.

The Wholesale Price Index, India's most closely watched inflation gauge, dropped to 4.7% in May on an annual basis, down nearly two-tenths of a percentage point from its 4.89% level in April. The broadly based wholesale price inflation reading, the lowest since late 2009, was well below market forecasts of a 4.9% rise.

“Cutting the key lending rate could create further devalue the Rupee, increase the costs of imports and put inflationary pressure,” said Bundeep Singh Rangar, Chairman of London-based advisory firm IndusView. “Inflation remains a roadblock for policymakers struggling to breathe life into Asia's third-largest economy, and is a major factor in the declining popularity of Prime Minister Manmohan Singh's government.”

India's economic growth rate slipped to a decade low of 5% in 2012-2013 on account of poor performance of farm, manufacturing and mining sectors. It is projected to rise to 5.7% in the 2013 fiscal year and firm to 6.5% and 6.7% in 2014 and 2015, respectively.

GDP growth in South Asia as whole slipped to 4.8% in 2012, mainly reflecting a continued deceleration in India, slower growth in Sri Lanka and Bangladesh, and sluggish growth in Pakistan and Nepal. Regional GDP growth is projected to pick up to 5.2% in 2013, before accelerating to 6% and 6.4% in 2014 and 2015, in line with strengthening external demand, normal monsoons and a gradual pickup in investment spending.

“There is a need to further improve the business environment. Reforms in the last one year are welcome, but more needs to be done in order to build foreign investors confidence,” said Rangar. “Decline in foreign investments could put pressure on the country’s balance of payments and also impact the value of the rupee.”

Media in India are expressing concerns over a sharp depreciation in the value of the rupee against the dollar. The rupee struck a lifetime-low of 57.98 to the dollar earlier in the week has sparked fears inflation could resurge as a key problem in India, which buys 80% of its crude oil from abroad. Earlier today, the rupee was at 57.72 to the dollar versus its previous close of 57.5150.

Production at factories, utilities and mines rose 2% from a year earlier after a revised 3.4% gain in March while Consumer prices climbed 9.31% in May from a year earlier. Gold and oil imports contributed to the $32.6 billion shortfall in the current account for the last quarter of 2012.

The Indian government is considering removing the FDI (Foreign Direct investment) cap on the telecom sector and raising the limit in defense in order to seek more foreign investment and boost the rupee value. Overseas investors would be able to own all of a telecoms company, up from 74% currently, with the ceiling in defense rising to 49% from 26%.

 The RBI has cut its policy repo rate by 75 basis points in 2013 to 7.25% but has warned of "little space" for further easing citing inflationary risks.

India’s GDP Growth Slows Sharply in March Quarter

IndusView, Friday May 31 (London): India’s economic growth slowed to its slowest pace in a decade in the March quarter, as the manufacturing and agriculture sectors shrank and a fall in the rupee suggests the economy remains under pressure in the current quarter.

India’s economy grew 5% in the year ended March, the slowest pace in a decade, in line with the projection of the statistics office. Growth in the fourth quarter slowed to 4.8% from 5.1% a year ago. India was recording annual growth of 9% until two years ago, but in recent months it has seen a sharp decline blamed on a slowdown in its manufacturing and agriculture sectors.

“This persistent sluggishness in the economy puts the Reserve Bank of India in a conundrum. It has to cut interest rates to stimulate growth but it can’t cut much as it’ll further devalue the rupee,” said Bundeep Singh Rangar, Chairman of London-based consulting firm IndusView. “What’s alarming is that the drop in manufacturing output suggests a decline in domestic consumption on top of a drop in foreign investment. The decline of the rupee has increased the cost of importing goods and put further inflationary pressure.”

During the year, agriculture grew at 1.9% compared with 3.6% a year ago, manufacturing at 1% against 2.7%, the trade, communication sector at 6.4% compared with 7%, while community services measuring government expenditure picked up to 6.6% from 6% a year ago.

The Indian rupee today sank to 10-month lows before closing with 21-paise loss at 56.17 against the US dollar, making imports costlier that is likely to worsen government's Current Account Deficit (CAD), currently estimated at 5%. The Reserve Bank of India cut its key lending rate thrice this year, all by a quarter of a percentage point, and markets were hoping it to further reduce the rate at its next policy meeting.

Foreign investment inflows into the country topped $50 billion on a net basis during 2012-2013 despite the government's efforts to woo foreign direct investment (FDI) yielding poor results. On a gross basis, investment was down almost 21% to $36.9 billion as foreign investors stayed away due to the poor sentiment in the country as well as problems in Europe and the slow US recovery.

Economists blame India’s relatively sluggish growth over the past year on reluctance by foreign or domestic business to invest, as a result of poor infrastructure for power and transport, uncertainties over taxation, bureaucratic delays and continued restrictions on foreign direct investment.

According to the Federation of Indian Chambers of Commerce and Industry, $52 billion of projects were facing delays because of a lack of official clearances. More than half the value of stalled projects is in power, with others in roads, metals, oil and gas and mining.

Reserve Bank of India Cuts Interest Rates To Boost Growth, As Expected

The Reserve Bank of India (RBI) has today reduced its interest rates by 25 basis points to 7.25%, in line with expectations, with inflation and global commodity prices moving in a favourable direction.

In March, annual inflation based on the Wholesale Price Index (WPI) came in at 5.96%, the slowest rate in years, down from 6.84% a month earlier. Food prices were at the heart of the slowdown, remaining unchanged between February and March, while fuel and power prices rose 0.36% and the price of manufactured products 0.13%. Annual consumer price inflation figures show inflation slowing to 10.4% in March from 10.9% in February.

“The moderation in WPI inflation set the scene for the RBI, where remains a tension between the competing priorities of stimulating the economy, tackling inflation and considering India’s unsustainable current account deficit,” said Bundeep Singh Rangar, Chairman of London-based advisory firm IndusView. “The rate cut should act as turnaround catalysts for renewed economic activity”.

The World Bank revised its growth forecast for the Indian economy in 2013-2014 to 6.1%, lower than its 7% estimate six months ago. The drop came at the back of lower agricultural growth at 2% instead of the previous 2.7%, even though the country is expecting normal monsoon.

India’s growth has been slowing, and hit a nine-year low of 5.3% in the March quarter, partly because of a global slowdown as well as weaker demand and investment activity at home. India received foreign direct investment (FDI) worth $1.79 billion in February 2013, a decline of about 19% due to global economic slowdown. In February 2012, the country had received FDI worth $2.21 billion.

“There is a need to further improve the business environment. Reforms in the last one year are welcome, but more needs to be done in order to build foreign investors confidence,” said Rangar. “Decline in foreign investments could put pressure on the country’s balance of payments and may also impact the value of the rupee.”

India's trade deficit eased to $10.32 billion in March from $13.54 billion recorded a year ago, much below the analysts’ expectation of a $13.50 billion deficit, as exports rose for the third straight month. Exports rose by 6.97% annually to $30.84 billion in March, while imports for the month declined 2.87% to $41.16 billion aided by a sharp fall in fuel prices.

In its March statement on the balance of payments for the third quarter on fiscal 2013, the RBI said the rise in the import bill was spurred largely by oil and gold imports. Gold has lost some of its sheen among global investors, with the price of the yellow metal down almost $224 per ounce since the beginning of 2013.

 In its previous monetary policy review, on March 19, RBI had reduced the repo rate by 25 bps to 7.50% and kept CRR unchanged. It’s still well above the 6% set two years ago in Sept. 2010.