In March 2025, the Reserve Bank of India (RBI) released India’s latest International Investment Position (IIP) data. As per IIP data, net claims of non-residents in India increased by USD 11 billion, to USD 364.5 billion during the 3rd Quarter (Q3: October to December) of Financial Year 2024-25 (FY25).
- The data showed a decrease in foreign assets of Indian residents by USD 40.1 billion and also, the claims of non-residents’ in India decreased by USD 29.1 billion. This results in an increase in India’s total foreign liabilities.
- RBI cited that the decrease in Indian residents’ foreign assets during Q3FY25 was mainly due to the decline of USD 70.1 billion in reserve assets. However, reserve assets witnessed an increase of USD 13.2 billion compared to December 2023.
Key Findings:
i.As per RBI’s latest data, the decline in foreign liabilities of India was due to the decrease in inward direct and portfolio investments during Q3FY25, though trade credit, loans and currency & deposits registered an increase.
ii.The data showed that reserve accounts represented 59% of India’s total international financial assets in December 2024.
- It further highlighted that difference in the exchange rate vis-à-vis other currencies impacted the change in liabilities, when valued in the United States of America (USA) dollar terms.
iii.The data revealed that the ratio of India’s international assets to international liabilities increased from 73.1 % (in December 2023) to 74.7% (in December 2024).
iv.The data showed that the share of debt liabilities in total external liabilities increased to 53.6% (in December 2024), compared to 52.9% (in Q2FY25) and 51.2% (in December 2023).
India’s CAD Increases to USD 11.5 billion in Q3FY25; Forex Reserves Decline by USD 37.7 billion
According to RBI’s latest data, India’s Current Account Deficit (CAD) has increased slightly to USD 11.5 billion, which accounts 1.1% of country’s Gross Domestic Product (GDP), during Q3FY25 from USD 10.4 billion (1.1% of India’s GDP) during Q3FY24, amid increase in service exports.
- However, India’s CAD moderated sequentially from USD 16.7 billion in Q2FY25, which represents 1.8% of country’s GDP, on the account of higher software services income and remittances to the Indian diaspora.
The data further revealed that overall India’s foreign exchange reserves (FER) declined by USD 37.7 billion, on Balance of Payment (BoP) basis in Q3FY25 compared to an increase of USD 6.0 billion in Q3FY24.
Key Findings in the Financial Account:
i.Foreign Direct Investment (FDI): As per the data, FDI registered a net outflow of USD2.8 billion in Q3FY25 compared to inflow of USD 4.0 billion in the corresponding period of FY24.
ii.Foreign Portfolio Investment (FPI): The data highlighted that FPI recorded a net outflow of USD 11.4 billion (in Q3FY25) as against an inflow of USD 12 billion in (Q3FY24).
iii.External Commercial Borrowings (ECBs): The net inflows under ECBs to India reached to USD 4.3 billion (in Q3FY25), compared to an outflow of USD 2.7 billion in the same period of last financial year.
iv.NRI Deposits: The net inflow of Non-Resident Indian (NRI) deposits amounted to USD 3.1 billion, lower than USD 3.9 billion in FY24.
BoP during 9MFY25:
i.As per RBI, India’s CAD has increased to USD 37 billion (1.3% of GDP) during 9 months (from April, 2024 to December, 2024) of FY25, from USD 30.6 billion (1.1% of GDP) during 9MFY24 mainly due to higher merchandise trade deficit.
- Also, net invisible receipts were higher during 9MFY25 compared to the same period of FY24, on account of services and transfers.
Note: India’s CAD is projected to witness an increase of USD 4-6 billion in Q4FY5, supported by a seasonal uptick in merchandise exports. Also, overall CAD is expected to be at 0.8% of GDP in FY25, which will slightly increase to nearly 1.0% of GDP in FY26.
ii.Net FDI inflow stood at USD 1.6 billion during 9MFY25, which was lower than USD 7.8 billion recorded during 9MFY24.
iii.Also, net FPI inflow amounted to USD 9.4 billion during 9MFY25, lower than USD 32.7 billion during the corresponding period a year ago.
iv.India’s FER (on BoP basis) saw a decrease of USD 13.8 billion during 9MFY25.
Recent Related News:
The Reserve Bank of India (RBI) has introduced new credit reporting rules. It has mandated that all lenders must update credit bureau records every 15 days instead of the previous monthly cycle. This direction came into effect from January 01, 2025.
- This new change aims to enhance credit score accuracy and ensure timely reflection of financial activities of borrowers.
