On June 30, 2021, the Reserve Bank of India (RBI) released the ‘Sources of Variation in Foreign Exchange(Forex) Reserves in India during 2020-21’ and reported an increase in the forex reserves in nominal terms, including the valuation effects, by USD 99.2 billion in FY21, compared to USD 64.9 billion of FY20.
Variation in Forex Reserves:
| Item | FY21 (US$ Billion) | FY20 (US$ Billion) |
|---|---|---|
| Forex reserves on a balance of payments basis (i.e., excluding valuation effects) | 87.3 | 59.5 |
| Forex reserves in nominal terms (including the valuation effects) | 99.2 | 64.9 |
| current account balance | 23.9 | -24.7 |
| Capital account | 63.4 | 84.2 |
| Foreign investment | 80.1 | 44.4 |
RBI Released India’s BoP Data; CAD stood at 1% of GDP in Q4FY21
RBI released the preliminary data on India’s balance of payments (BoP) for the fourth quarter (Q4) of FY21 (January-March, 2021) and reported a Current account surplus of 0.9 percent of GDP in FY21, as against a deficit of 0.9 percent in FY20 due to the sharp contraction in the trade deficit to $102.2 billion in FY21 from $157.5 billion in FY20.
Key Features of India’s BoP:
i.The Current Account Deficit (CAD) in Q4 FY21 was increased to US$ 8.1 billion (1 percent of GDP) when compared with a surplus of US$ 0.6 billion (0.1 per cent of GDP) in Q4 FY20 and a deficit of US$ 2.2 billion (0.3 percent of GDP) in Q3 FY21.
- The increase in CAD was primarily due to higher trade deficits and lower net invisible receipts.
ii.India’s Balance of Payments (BoP):
| Items | BoP in FY21 (US$ billion) | BoP in FY20 (US$ billion) | BoP in Q4FY21 (US$ billion) | BoP in Q4FY20 (US$ billion) |
|---|---|---|---|---|
| Net direct investment (FDI) | 44.0 | 43.0 | 2.7 | 12.0 |
| Net foreign portfolio investment (FPI) | 36.1 | 1.4 | 7.3 | 13.7 |
| External commercial borrowings to India | 0.2 | 21.7 | 6.1 | 9.4 |
| Accretion to Forex Reserve (BoP basis) | 87.3 | 59.5 | 3.4 | 18.8 |
iii.In Q4FY21, the net services receipts increased due to the rise in net earnings from computer, transport and business services on a year-on-year basis.
iv.The net outgo from the primary income account (reflecting net overseas investment income payments) increased to US$ 8.7 billion in Q4FY21 from US$ 4.8 billion in Q4FY20.
- Net invisible receipts in FY21 was reduced due to an increase in net outgo of overseas investment income payments and lower net private transfer receipts.
Note – BoP is the statistical statement that contains the transaction in goods, services and income between the Indian economy and the rest of the world.
Recent Related News:
On May 31,2021, Under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India(RBI) had fixed the limits for Foreign Portfolio Investors’ (FPI) investment in Government securities (G-secs) and State Development Loans (SDLs) unchanged at 6 percent and 2 percent respectively, of outstanding stocks of securities for FY22.
About Reserve Bank of India (RBI):
Established – 1st April 1935
Headquarters– Mumbai, Maharashtra
Governor– Shaktikanta Das
Deputy Governors – Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar
