Sources of Variation in Foreign Exchange Reserves in India during April-September 2023

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Summary:

The Reserve Bank of India (RBI) has released the balance of payments (BoP) data for April-September 2023, which shows an increase in foreign exchange reserves during this period. The sources of the variation in foreign exchange reserves during this period are current account balance, capital account (net), and valuation change. The capital account shows a net inflow of $44.5 billion, largely driven by foreign investment and banking capital. The current account balance reflected a deficit of $17.5 billion. The valuation change resulted in a loss of $17.7 billion due to the appreciation of the US dollar against major currencies and higher bond yields. On a balance of payments basis, foreign exchange reserves increased by $27.0 billion, a significant improvement from the depletion of $25.8 billion in the same period last year. Overall, the foreign exchange reserves in nominal terms increased by $9.3 billion.