India’s forex reserves may rise to $700 billion by FY25-end, say experts
India’s forex reserves may rise to $700 billion by FY25-end, say experts
India’s foreign exchange reserves are expected to rise to $700 billion by the end of this financial year on back of expected inflows from foreign portfolio investors (FPI) in Indian bonds through global bond index, currency experts said.
“This year our reserves should reach $700 billion by end of financial year,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
Currently, India's forex reserves stand at $653 billion, as per RBI's data.
Today, Indian bonds have officially become part of the JPMorgan's Government Bond Index-Emerging Markets (GBI-EM). This was followed an announcement by JPMorgan Chase & Co on September 22, 2023, that they will add Indian bonds in their global bond index.
This will lead to inflows of around $2 billion on a monthly basis in the Indian bond market. There is expectation of around $20-25 billion inflows throughout 10 months.
“India is a strong diversification option, with good macros and a stable currency. We could see foreign inflows of $2-3 billion per month, with the pace likely to accelerate once the U.S. starts cutting rates,” said Parul Mittal Sinha, Head of Financial Markets for India and Co-Head of Macro Trading for ASA at Standard Chartered.
JP Morgan has indicated that the index will eventually hold 10 percent weightage of Indian bonds, adding 1 percent every month starting June 2024 and reaching the maximum weight of 10 percent by March 31, 2025.
The index inclusion makes a pathway for foreign investors to have an exposure in the Indian bonds.
Earlier today, Moneycontrol reported that rupee is likely to appreciate in the coming days and trade in the range of 82.50 to 83.50 against the US dollar.
Forex reserves
For the week ended June 21, India’s forex reserves rose by $816 million to $653.711 billion.
For the week ended June 21, foreign currency assets, a major component of the reserves, decreased by $106 million to $574.134 billion, the data released on June 28 showed.
Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves. Gold reserves increased by $988 million to $56.956 billion during the week, the RBI said.
The Special Drawing Rights (SDRs) were down by $57 million to $18.049 billion, the apex bank said. India’s reserve position with the IMF was down by $9 million to $4.572 billion in the reporting week, the apex bank data showed.