India's forex reserves climb to a four-month high of $604bn
India's forex reserves have hit a whopping $604 billion (nearly Rs. 50.37 lakh crore) as of December 1. This marks the first time in four months that India crossed the $600 billion threshold, according to Reserve Bank of India (RBI) Governor Shaktikanta Das. The last time reserves were this high was back in August. Das is confident that India can easily meet its external financing needs, saying, "We remain confident of meeting our external financing requirements comfortably."
Rupee shows low volatility despite global challenges
In 2023, the Indian rupee (INR) has remained relatively stable compared to other emerging market economies (EMEs), even with higher US treasury yields and a stronger US dollar. Das said, "The relative stability of the Indian rupee reflects the improving macroeconomic fundamentals of the Indian economy and its resilience in the face of formidable global tsunamis." The daily INR exchange rate's coefficient of variation was just 0.66 (CY2023), the lowest among EME peers.
Breakdown of forex reserves components
Recent data from the RBI's Weekly Statistical Supplement shows that foreign currency assets (FCAs) rose by $5.08 billion to $533.61 billion. Gold reserves increased by $991 million to $47.33 billion, while Special Drawing Rights (SDRs) grew by $32 million to $18.25 billion. The reserve position in the International Monetary Fund (IMF) also saw a slight bump, up $5 million to $4.85 billion.
FPIs make a comeback, FDIs see decline
Foreign portfolio investment (FPI) flows have made a major comeback in FY24, with net FPI inflows reaching $24.9 billion (as of December 6), compared to net outflows in the previous two years. However, net foreign direct investment (FDI) dipped to $10.4 billion between April and October 2023, down from $20.8 billion the year before. On the bright side, net inflows from external commercial borrowings (ECBs) and non-resident deposit accounts are much higher than last year.
