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India’s foreign exchange reserves jump $ 8.22 billion; cross the half billion mark for the first time

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MUMBAI: The country’s foreign exchange reserves crossed the half-trillion-dollar mark for the first time after they increased by $ 8.22 billion in the week ending June 5, helped by higher currency inflows.

Reserves rose to $ 501.70 billion in the reporting week, helped by a huge increase in foreign currency assets (FCA), the latest data from the Reserve Bank of India (RBI).

This amount of foreign exchange reserves is equivalent to one year’s imports.

In the week prior to May 29, reserves had increased by $ 3.44 billion to $ 493.48 billion.

In the week ending June 5, FCA, which is an important component of general reserves, increased $ 8.42 billion to $ 463.63 billion.

Expressed in dollars, foreign currency assets include the effect of the appreciation or depreciation of non-US units such as the euro, the pound and the yen on foreign exchange reserves.

Chief financial adviser to the finance ministry Sanjeev Sanyal said in a tweet: “India’s foreign exchange reserves reached $ 501.7 billion. As I have been saying in the past few weeks, suppressing demand … would push INR to appreciate after an initial capital outflow. ”

“Now, as we open up the economy to eliminate demand suppression and boost credit growth, we will revive imports and inflows of foreign capital. The point is that the identities of demand imply a dynamic dynamic that is quite different than the naive forecasters suggest. ” he said in a later tweet.

According to a senior official of the finance ministry, the foreign exchange reserves that cross $ 500 billion is a historic moment for the country.

“After March 2020, an increase of approximately $ 24 billion is a sign of confidence in the Indian economy,” said the official.

India has been rewarded for its strong macroeconomic stability, the official added.

Care Ratings chief economist Madan Sabnavis said one of the reasons for this increase in foreign exchange reserves is the reduction in the current account deficit, as business activity has collapsed due to disruptions caused by the pandemic COVID-19.

Second, we are seeing capital flows increase substantially. Due to the financial crisis and also because banks are not enthusiastic about loans, most companies are trying to see the path of the external commercial loan (ECB) to raise funds, “Sabnavis said.

In 2019-20, foreign direct investment (FDI) in the country increased by 13%, the strongest rate in the last four financial years, to a record $ 49.97 billion compared to $ 44.36 billion received in 2018- 19.

In the first week of June, foreign portfolio investors injected a massive run of Rs 18,589 into Indian markets.

The Reliance Industries mega-rights issue, which closed for the past week and was oversubscribed, and the sale of 2.8 percent shares by Uday Kotak in Kotak Mahindra Bank drew significant foreign flows.

In the past seven weeks, Reliance Industries has raised Rs 97,886 crore by diluting Jio’s stake to eight investors, including Facebook and KKR.

Deputy Vice President of Kotak Securities (foreign exchange and interest rate investigation) Anindya Banerjee said: “This increase (in foreign exchange reserves), which started somewhere in the first week of April, is a combination of the RBI that it gets dollars from the spot market and also due to the depreciation of the US dollar, since the end of March, against the main currencies such as the euro, the pounds and the yen. ”

In the week ending June 5, gold reserves decreased from $ 329 million to $ 32.35 billion, RBI data showed.

In the week of the report, special drawing rights with the International Monetary Fund (IMF) increased from $ 10 million to $ 1.44 billion.

The country’s reserve position with the IMF also increased from $ 120 million to $ 4.28 billion during the reporting week, the data showed.

Times of India

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