As oil prices push up the import bill, the current account deficit is expected to widen further and foreign investors pull money out of the Indian stock market, it is fair to ask: Is there any good news out there?
Well, the new balance of payments data released by the Reserve Bank of India on Monday offers us a glimmer of hope. The Indian diaspora sent back a record $40 billion in 2007-08, up from $28 billion in the previous year. Remittances now bring in more than export earnings of the software industry, net foreign direct investment and even the money poured into Indian shares by foreign institutional investors (FIIs).
The current year is likely to be a bad one for capital inflows: FIIs are running for the exits and commercial borrowings in the frozen global credit markets will be tough.
India needs capital to fund its growing current account deficit. Overseas Indians and the money they wire home are likely to play a big role in stabilizing the economy in these difficult times.