Concerned over the mismatch between short term portfolio investment as represented by FIIs and a long-term investment in terms of FDI, the Survey, tabled in Parliament, said constraints impeding higher FDI inflows need to be identified.
"India's capital account in recent years has gained far more strength from short-term FDI flows. This necessitates revisiting FDI policy and identifying constraints impeding higher FDI inflows. Procedural simplifications like removal of anamolies from Press Note 18 are likely to encourage much greater FDI inflows," the survey said.
Economic Survey 2004-05: Complete Coverage
Portfolio inflows in first half of 2004-05 at $15.4 billion was much higher than $9.3 billion in same period pervious year. Such outflows in April-September 04 stood at $14.8 billion as compared to $5.8 billion in 2003.
The Net portfolio flows picked up from just $81 million in the first quarter to $430 million in July-September 2004. The figure was much lower than the net portfolio inflows of $3.5 billion in 2003-04.
"There are indications of a gain in momentum of portfolio inflows in the more recent months of the current financial year," the survey said.
Net FDI inflows increased from $771 million in first quarter of 2004-05 to $1.3 billion. In the first half of 2004-05, the FDI inflows were $1 billion more than the same period last year.
