A lot of people are getting anxious about a scenario with outsized capital inflows hitting India. The historical time-series is illuminating:
| Quarter | Billion USD | Percent to GDP |
| 12/2004 | 12.6 | 7.4 |
| 03/2005 | 8.2 | 4.6 |
| 06/2005 | 5.8 | 3.4 |
| 09/2005 | 10.5 | 6.2 |
| 12/2005 | 0.8 | 0.4 |
| 03/2006 | 8.4 | 4.2 |
| 06/2006 | 10.7 | 5.7 |
| 09/2006 | 7.9 | 4.2 |
| 12/2006 | 10.8 | 4.8 |
| 03/2007 | 15.8 | 6.7 |
| 06/2007 | 17.8 | 7.4 |
| 09/2007 | 33.2 | 13.6 |
| 12/2007 | 31.0 | 10.7 |
| 03/2008 | 26.0 | 8.7 |
| 06/2008 | 11.1 | 4.0 |
| 09/2008 | 7.6 | 2.8 |
| 12/2008 | -4.3 | -1.6 |
| 03/2009 | -5.3 | -2.0 |
| 06/2009 | 6.7 | 2.7 |
In the latest quarterly data (Apr/May/June 2009), net capital inflows worked out to $6.7 billion or 2.7% of GDP. These are not big numbers.
What are big numbers? 10% of GDP is a big number, which was breached for six months in this history. At the time, this corresponded to above $30 billion a quarter of net capital inflow. In future quarters, the physical magnitude will depend on how big GDP is at the time. My rough sense of 10% of GDP in the Oct-Nov-Dec 2009 quarter is that it will be $30 billion. To get to these numbers, we’d need to get back to an environment like Jul-Dec 2007 in terms of optimism about emerging markets in general and India in particular. So far, this doesn’t seem to be what is in place.
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