India's foreign exchange reserves cross $ 500 billion for the first time

[caption id="" align="alignnone" width="750"] Courtesy: unplash/Sharon McCutcheon[/caption]

The country's foreign exchange reserves increased strongly by $ 8.22 billion in the week ended June 5 due to a surge in foreign investment.

The country's foreign exchange reserves crossed the $ 500 billion level for the first time in history. This was revealed in the latest data of the Reserve Bank. According to the data, the country's foreign exchange reserves reached $ 501.70 billion in the week under review due to sharp increase in foreign currency assets.

This reserves is equivalent to meeting one year's import requirements. Earlier in the week ended May 29, the foreign exchange reserves had increased by $ 3.44 billion to reach $ 493.48 billion. Foreign currency assets increased by $ 3.44 billion in the week ended June 5 and reached $ 493.48 billion.

Foreign exchange assets contribute the most to foreign exchange reserves. Foreign exchange reserves are counted in dollar terms. However, it also includes other currencies such as Euro, Pound, Yen. The fluctuations of these currencies also affect the total reserves. According to a senior finance ministry official, the foreign exchange reserves crossed $ 500 billion is a historic moment for the country. The growth of nearly $ 24 billion after March 2020 is a mark of confidence in the Indian economy.

Madan Sabnavis, chief economist at CARE Ratings, said one of the reasons for the surge in foreign exchange reserves is the current account deficit. The second thing is that we are seeing a considerable increase in capital flows. Banks are not enthusiastic about lending due to financial crisis. As such, most companies are trying to adopt external commercial lending (ECB) method to raise funds. Foreign direct investment (FDI) registered an increase of 13 percent in 2019 20. This is the fastest jump in FDI during the last four financial years.

FDI has increased from $ 44.36 billion in 2018-19 to $ 49.97 billion in 2019-20. Foreign Portfolio Investors (FPIs) infused Rs 18,589 crore into Indian markets in the first week of June. The rights issue of Reliance Industries and the sale of Uday Kotak's 2.8 per cent stake in Kotak Mahindra Bank attracted significant foreign investment. Apart from these, in the last seven weeks, Reliance Industries has raised Rs 97,886 crore by selling stake in Jio to eight investors including Facebook and KKR.

In the week ended June 5, gold reserves fell by $ 329 million to $ 32.35 billion. During this period, the special drawing rights with the International Monetary Fund (IMF) increased by $ 10 million to $ 1.44 billion. The country's reserve position with the IMF also increased by $ 120 million to $ 4.28 billion during the week under review.