India’s financial position with the rest of the world improved over the year. The country increased its overseas assets more than it increased its foreign liabilities, largely due to a rise in Reserve Assets (RA), according to a data by Reserve Bank of India (RBI).
During the financial year 2023-24, the net claims of non-residents on India decreased by US$ 5.5 billion. This happened because India’s external financial assets grew by US$ 109.8 billion, which was more than the increase in its external financial liabilities, which grew by US$ 104.3 billion.
A significant part of the increase in overseas financial assets held by Indian residents came from RA, which made up 62% of the total increase. Other important contributors were currency and deposits, and overseas direct investments.
Most of the rise in foreign liabilities was due to inward portfolio investments, direct investments, and loans. These components made up over three-quarters of the total increase in foreign liabilities during the year. The variation in the value of the Indian Rupee compared to other currencies also affected the change in liabilities when these were valued in US$.
The ratio of India’s international financial assets to its international financial liabilities improved, reaching 74% in March 2024, up from 71.4% in March 2023.
The RBI also mentioned that relative to the Gross Domestic Product (GDP) at current market prices, both India’s RA and the overseas financial assets and liabilities of residents increased during the financial year 2023-24.
Investments coming into India in the form of portfolios, direct investments, and loans were the main reasons for the increase in foreign liabilities. The overall financial health of India relative to its economy also showed improvement, with a better ratio of assets to liabilities and a decrease in the net claims of non-residents compared to the GDP. (ANI)
