Why India is Vulnerable to Portfolio Investment Movements: Analysis of capital flows between India and the United States


Mandira Sarma

Published: December 2013


This paper analyses the trend of capital flows between India and the US during 2000–2012. The US is a major source of foreign capital in India, through both direct and portfolio investment. During this period, portfolio investment from the US to India dominated over direct investment. A large part of India’s outward FDI is towards the US, although in terms of total FDI in the US, India’s share is not very large. Internationally active Indian banks have the largest foreign claims towards the US, however this amounts to less than 1% of the Indian banking sector.



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