Mumbai: India’s foreign exchange reserves reached a historical high of $675 billion as of August 2. This record high is a significant milestone for India’s economy, indicating a strong financial position and the ability to withstand external shocks. Overall, India’s external sector remains resilient, with key indicators continuing to improve, RBI Governor Shaktikanta Das said on Thursday.
“We remain confident of meeting our external financing requirements comfortably,” he said.
Das also said that India’s current account deficit (CAD), which is a key indicator of a country’s economic health, moderated to 0.7 percent of GDP in 2023-24 from 2.0 percent of GDP in 2022-23. This reduction is primarily due to a lower trade deficit and robust services and remittance receipts, indicating a healthier balance of payments for India.
In Q1:2024-25, the merchandise trade deficit widened as imports grew faster than exports, he added.
The RBI head further stated that buoyancy in services exports and strong remittance receipts are expected to keep CAD within a sustainable level in Q1:2024-25.
“We expect CAD to remain eminently manageable during the current financial year,” he remarked.
On the external financing side, foreign portfolio investors became net buyers in the domestic market from June 2024, with net inflows of $9.7 billion during June-August (until August 6) after witnessing outflows of $4.2 billion in April and May, the central bank chief said.
Foreign direct investment (FDI) flows picked up in 2024-25, painting an optimistic picture of India’s economic growth. Gross FDI rose by more than 20 percent during April-May 2024, while net FDI flows doubled during this period compared to the corresponding period of the previous year. Figures compiled by the RBI show that FDI flows rose sharply to $15.2 billion in April-May 2024-25 from $12.3 billion during the same period a year ago.
Net FDI flows increased twofold to $ 7.1 billion in April-May 2024-25 from $ 3.4 billion a year ago due to lower repatriation. External commercial borrowings moderated during April-June 2024-25, while non-resident deposits recorded higher net inflows during April-May compared to the previous year, Das added.
–IANS
