FDI, FPI inflows propel forex reserves to record high of $513.25 billion

The RBI data released on Friday shows that in the week ended July 3, the foreign currency assets expanded by $5.66 billion to $473.26 billion. Even the gold reserves were up by $495 million to $34.02 billion. Despite the Covid-19-related stress on the economy and the country going into a lockdown in towards the end of March, the first six months of calendar 2020 have seen a record $55 billion rise in forex reserves.

According to the data released by RBI, while the FDI inflow in March and April amounted to $6.2 billion, the foreign portfolio investments too stabilised since the big outflow in March and April amounting to around $17 billion. While the FPI outflows narrowed to nearly $1 billion in May, in June it expanded by close to $3.5 billion.

Experts say that the reserves have also been well supported decline in import outgo on account of sharp decline in crude oil prices and impact of pandemic on trade.

The rise in forex reserves not only provides cushion to the economy in terms of covering the import expenditure, it has also resulted into stability in rupee against the dollar.

Experts say in times of dwindling economic activity and growth, rising forex reserves provide a lot of strength as they now cover one-year of import expenditure. India’s foreign exchange reserves started rising since significantly from September 2019.