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    Tulsi
    Dash  ·  
    Jan 04, 2021

    INDIA'S FOREX RESERVES: DESPITE THE NEGATIVE GDP GROWTH AND COVID, INDIA'S FOREX SHOT UP TO $103 BN

    in News Updates



    India's foreign exchange (forex) reserves have shot up by over $103 billion in the current fiscal (as of December 25). And it's looking that, in the remaining three months, it will beat up the all-time-high increase of $110.5 billion recorded in 2007-08. Both of the situations are contrasting. In 2007-08, the economic was booming, having a Gross Domestic Product (GDP) Growth of 9.3%and the Centre's fiscal deficit was just 2.5% of GDP. While for the current fiscal (2020-21), RBI is expecting growth of -7.5% and Centre's fiscal deficit is projected to be 6.5 - 7% of GDP.


    In 2007-08, the $110.5 billion reserve was constituted largely by foreign investment, external commercial borrowings and other capital inflows. But now in 2020-21, the forex reserve accumulation has been driven mainly by the Country's Current Account Balance. Current Account balance is the gap between the exports and the imports which came positive at $34.7 billion during April- September. And this surplus is because of the fall in imports by $95.6 billion in April- September 2020. Just not that, Current Account Surplus is also because of some Foreign Capital Inflows. For Instance, Reliance Industries attracted global investors of $27 billion in its Jio platforms digital and retail businesses between April 22 and November 9. Some foreign portfolio investors also pumped $28.65 billion in Indian Equity and debt markets this year. But our total foreign Capital Inflows (net) have been only $16.5 billion for April- September 2020. Hence, unlike in 2007-08, Capital Flows of now are seeming to be more 'push' than 'pull' factors. All-in-all, we are having an extraordinary situation where despite of having negative growth for the first time in 41 years, our forex reserves are grooming.

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