Informist, Thursday, Jun 8, 2023
–RBI Das: CAD narrowed, FX reserves comfortable
–RBI Das: FX reserves at comfortable $595.1 bln as Jun 2
–RBI Das: Including forward assets, FX reverses well above $600 bln
–RBI Das: CAD is expected to have moderated in Jan-Mar
–RBI Das: CAD should be eminently manageable FY24
–RBI Das: India external sector remains resilient
–RBI Das: Preliminary data for Apr suggests FDI inflows improved
–RBI Das: Net FPI inflows stand at $8.4 bln in FY24 till Jun 6
–RBI Das: India making firm strides to hit $1 trln export aim by 2030
–RBI Das: Trade deficit has narrowed in recent months
–RBI Das: FY23 services exports grew faster than merchandise exports
–RBI Das: Services exports, remittances supported external sector
MUMBAI – India’s current account deficit is expected to have moderated in Jan-Mar and should be eminently manageable in 2023-24 (Apr-Mar), Reserve Bank of India Governor Shaktikanta Das said today in his Monetary Policy statement.
“Domestic macroeconomic fundamentals are strengthening – economic activity is exhibiting resilience; inflation has moderated; the current account deficit has narrowed; and foreign exchange reserves are comfortable,” Das said.
India’s current account deficit shrank to $18.2 bln in Oct-Dec from a quarter ago, as merchandise trade deficit narrowed and services and private transfer receipts were robust.
The current account deficit for Jul-Sep was revised lower to $30.9 bln rupees from $36.4 bln, which was an all-time high. The current account deficit for Oct-Dec was 2.2% of GDP, against 3.7% a quarter ago and 2.7% a year ago.
Speaking about the robust growth in India’s services exports, Das said, “Service exports and remittances have provided valuable support to India’s external sector viability.”
India’s services exports rose 7.5% on year to $25.84 bln in April from $30.48 bln in March, according to data released by the RBI on Jun 1. However, services imports fell 3.1% on year to $13.63 bln in April, the first decline in the current calendar year.
Das also said India was moving progressively towards the target of $1 trln worth of exports by 2030.
“India is making resolute strides to achieve the $1-trln merchandise export target by 2030 by focusing on diversification of markets and products; leveraging free trade agreements; strengthening manufacturing capacity and competitiveness by participating in value chains; and through schemes such as production linked incentive across sectors,” Das said.
India’s merchandise trade deficit widened to a record high of $266.78 bln in the financial year ended March from $191.05 bln the preceding year.
The country’s exports in April declined 12.7% to $34.66 bln.
Talking about inflows, which have eased the pressure on India’s current account deficit, Das said foreign portfolio investment flows have seen a significant turnaround in 2023-24, led by equity flows. Net foreign portfolio inflows stood at $8.4 bln till Jun 6, compared to net outflows in the preceding two years, he said.
Das said that the current level of India’s foreign exchange reserves was “comfortable”. Foreign exchange reserves stood at $595.1 bln as on Jun 2. Inclusive of net forward assets, foreign exchange reserves were well above $600 bln, he said.
Das also spoke about the current status of rupee trade settlement. “The international settlement of trade in rupee through the arrangement of rupee vostro accounts, the process has already started,” he said. On May 24, the governor had said that countries holding excess rupees in their vostro accounts in India could invest the surplus amount in government securities, treasury bills, and other investment avenues.
Central banks and commercial banks in other countries have been in discussions with the RBI to seek clarity on the process to invest in Indian securities, such as using surpluses in vostro accounts which have accrued from internationalised rupee trade, he said. “It is under discussion with them, and we expect the process to begin soon,” Das said.
As on May 24, the RBI had far permitted 17 banks to settle trade in rupees in 18 countries, and 65 vostro accounts were opened for the purpose. A vostro account is an account held by a domestic bank for a foreign bank, denominated in the domestic currency of the former. End
US$1 = 82.56 rupees
Reported by Kabir Sharma
Edited by Avishek Dutta
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