India's forex reserves at historic high of $651.5 bn, CAD to dip: RBI

Mumbai: With a lower trade deficit, robust services export growth and strong remittances, the current account deficit (CAD) is expected to have moderated in the January - March quarter of 2023-24, RBI Governor Shaktikanta Das said on Friday.

India’s foreign exchange reserves reached a historical high of US$ 651.5 billion as of May 31. India’s external sector remains resilient and overall, we remain confident of meeting our external financing requirements comfortably, Das said at a press conference after the monetary policy meeting.

India, with an expected 15.2 per cent share in world remittances in 2024, continues to be the largest recipient of remittances globally. Overall, the current account deficit for 2024-25 is expected to remain well within its sustainable level, he added.

The RBI chief said services exports were predominantly driven by software exports, other business services and travel exports. The phenomenal rise of global capability centres (GCC) in India has provided a significant boost to India’s software and business services exports, he pointed out.

He observed that on the external financing side, foreign portfolio investment (FPI) flows surged in 2023-24 with net FPI inflows at US$ 41.6 billion. Since the beginning of 2024-25, however, foreign portfolio investors have turned net sellers in the domestic market with net outflows of US$ 5.0 billion (till June 5).

In 2023, India retained its position as the most attractive destination for greenfield foreign direct investment (FDI) in Asia Pacific. Gross FDI remained robust in 2023-24, but net FDI moderated. External commercial borrowings (ECBs) and non-resident deposits recorded higher net inflows as compared with the previous year. The amount of ECB agreements also grew markedly during the year, he added.