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India’s Forex Reserves cross half trillion dollars for the first time

India’s foreign exchange reserves increased by US$ 8.2 billion in June 2020 and crossed the milestone US$ 500 billion mark for the first time in the country’s history.

As per the data released by the central bank, the healthy surge in the forex was largely on the back of capital raising rounds by Reliance and Kotak Mahindra, as the foreign currency asset held by the Reserve Bank of India increased by US$ 8.4 billion and stood at a record US$ 463 billion in the reporting week.

Foreign currency assets include the effect of appreciation or depreciation of non-US currencies such as the euro, pound and yen held in the reserves. India has seen an increase in the foreign reserve since over a year and has overtaken Russia and South Korea emerging as the third-biggest holder of forex reserves only behind China and Japan.

“We feel that the inflows coming in on account of Foreign Direct Investment and debt raising exercises by domestic financial institutions and Non-Banking companies would have largely contributed to the surge in inflow,” said Saugata Bhattacharya, Chief Economist at Axis Bank.

“Something which differentiates our reserves from China and Japan is the sporadic FDI inflows and contribution of inward remittances. However, over the recent months, capital inflows to some of the largest corporates have indicated that not just sunrise sectors but even the mature industries are finding interest among global investors,” said K Harihar of First Rand Bank.

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