Outsized capital inflows?

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.