Investment by foreign companies in India produces a claim for those companies. Foreign investment means creation of assets in the form of shares, bonds, deposits and physical assets for foreigners. Similarly, there are loans by foreign banks, governments and agencies to India. Theses also represent assets for foreigners at the same time liabilities for India.
In the same manner, there are investments by Indian companies in foreign countries and loans by Indian government to foreign countries. These investments, loans etc., by companies, individuals as well as the government of India results in assets for the country.
Now, it will be interesting to know whether the assets for India is greater than the assets owned by foreign entities and individuals in India at a point of time. For example, what is the size of assets held by foreigners in India (this represents liability for India) and assets held by Indians in foreign countries (this represents assets for India). Such information is given under India’s International Investment Position.
The international investment position measures assets and liabilities at a particular point of time. That means the stock of assets and liabilities till date for a country.
IMF’s International Investment Position
The IMF publishes a statistical report showing the international investment position of different countries.
The IMF’s IIP is a statistical statement that shows an economy’s stock of external financial assets and liabilities at a particular point or time.
The international investment position, compiled at the end of a specific period such as year-end, is the balance sheet of the stock of external financial assets and liabilities. The items that compose financial assets and liabilities are financial claims on and liabilities to nonresidents, equity assets and liabilities, financial derivative instruments, monetary gold, and SDRs.
Net Investment Position
The accurate indicator of the investment position is the Net Investment position (Net IIP) which can be calculated from the IIP. The net international investment position (the stock of external assets less the stock of external liabilities) shows the difference between what an economy owns in relation to what it owes. The net IIP, combined with the stock of an economy’s nonfinancial assets, composes the net worth of that economy.
India’s International Investment Position
India’s International Investment Position as on December 2013 shows that Indian residents’ financial assets abroad stood at US$ 458.9 billion. The foreign-owned asset in India is US$ 776.1 billion. The data shows that India has net liabilities in its international investment position.