With no capex to spend on, MNCs sent $7.4 billion home in Q1

Mumbai: Nearly $13 billion flowed out of the country in the form of repatriation by international companies in the June quarter as dividends dominated the outflow with more than half from multinational companies anticipating lower investment requirements amid demand contraction due to Covid-19.More than half the $12.7 billion income repatriated is dividend and profits by multinational firms to parent companies and the remaining was by portfolio investors, data from the RBI shows.Multinational companies took back home 55% higher profits they earned in India during April-June this year at $7.4 billion, up from $4.7 billion in the same period a year ago, RBI data show. The surge in repatriation took place despite global economic activity coming to a virtual standstill due to the Covid-19-forced lockdown.“Typically, some outbound dividend and profits from companies are retained as fresh capital for new capex,” said Rahul Bajoria, chief India economist at Barclays. “However, in the April-June (Covid) quarter, foreign companies appeared to have repatriated cash and profits to their parent possibly anticipating smaller investment needs.”Investment income largely includes income earned out of foreign direct investment and portfolio investment which comprises an important component of the current account in the country's balance of payments. Despite higher outflows under investment income the current account ended in a surplus of $19.7 billion during the quarter largely supported by merchandise trade surplus as imports shrank because of economic contraction.Also, the deficit in overall investment income rose only marginally to $8.4 billion during the quarter from $7 billion a year ago because the outflows of income from portfolio investments almost halved to $1.2 billion from $2.5 billion.

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