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2022 | OriginalPaper | Chapter

4. Capital Formation and Foreign Investment

Author : Sebastian Morris

Published in: Macroeconomic Policy in India Since the Global Financial Crisis

Publisher: Springer Nature Singapore

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Abstract

In this chapter, we bring out the trends in gross capital formation, and in foreign investment both FDI and FII. Gross capital formation has been muted its share falling from the high levels achieved in the “Tiger Period” to levels around 32%. And the share of the private sector had fallen from the high levels reached. The story of reforms since 1991–92 has been one of the shares of private corporate sector rising. Both portfolio and direct investments have been modest or nearly stagnant though showing much volatility. FDI has generally followed growth. In the period since 2011–12, they mirror the overall slowdown and the fall in the rate of gross capital formation.

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Footnotes
1
Essentially we plot \(\mathrm{ln}(\left({Y}_{t}-h\left({Y}_{t}\right)\right)/\left({Y}_{t-1}-h\left({Y}_{t-1}\right)\right))\) where \(Y\) is either the sale or purchase of equity by the FIIs.
 
2
The Fisher open brings out the excess of domestic rates over US (global) rates after taking into account the actual depreciation (ex-post) of the domestic currency. The Fisher open is also the violation of the uncovered parity condition. It is usually positive in the case of emerging market currencies when measured against the US dollar a reserve currency, unless reduced through active monetary and exchange rate management as many of the export-led East Asian countries do.
 
Metadata
Title
Capital Formation and Foreign Investment
Author
Sebastian Morris
Copyright Year
2022
Publisher
Springer Nature Singapore
DOI
https://doi.org/10.1007/978-981-19-1276-4_4