What if the FIIs do not return? It won’t be as bad as 10 years ago, says Mihir Vora
Mihir Vora, CIO, Trust MF, says India’s “oil sensitivity to the GDP has reduced because services exports have boomed. It used to be $100 billion, now we are $240 billion. So, we are far bigger in terms of services exports which is reducing the volatility of oil. Yes, there is a current account deficit, but it is much less volatile than what it used to be. So, our external vulnerability to oil has reduced significantly so that is one. And second, again as we all know, compared to 10 years ago, look at the domestic flows.”
We are assuming that FIIs will come back. That is a big assumption. Yes.
Unlock Leadership Excellence with a Range of CXO Courses
Offering CollegeCourseWebsiteIIM LucknowIIML Chief Executive Officer ProgrammeVisitIIM LucknowIIML Chief Marketing Officer ProgrammeVisitIndian School of BusinessISB Chief Technology OfficerVisit
And there is a difference in assumption and reality. What if they do not come? What if they find China more attractive? What if they say, okay we missed the bus too bad, but the relative case of coming back to India now at these levels of 21,000 plus is not there. Could that be a dampener for next year's liquidity setup?
To an extent, yes. But if I were to compare India now versus India 10 years ago, there are two huge structural changes that have happened. One is that the trade deficit or the oil import bill is no longer that much a percentage of GDP as it was because oil imports have not gone up that much, but the GDP has expanded. So, oil sensitivity to the GDP has reduced because services exports have boomed. It used to be $100 billion, now we are $240 billion. So, we are far bigger in terms of services exports which is reducing the volatility of oil.
Yes, there is a current
