RBI Data Reveals Impressive Rise in India’s Net FDI, Defying Global Economic Trends

Mumbai: India experienced a notable surge in net Foreign Direct Investment (FDI) in October, marking a 21-month high and signaling the robustness of the country’s economic fundamentals, as per data compiled by the Reserve Bank of India (RBI).

RBI data reveals that October’s net FDI reached $5.9 billion, a significant increase from the $1.55 billion recorded in September. This upward trend in net FDI has been sustained for three consecutive months.

Approximately 80% of the gross FDI inflows in equity were directed towards key sectors, including manufacturing, retail, energy, and financial services.

Leading the list of countries contributing to FDI inflows were Mauritius, Singapore, Cyprus, and Japan, collectively accounting for four-fifths of the total for the month.

However, data for the April-October period in the current fiscal year indicated a decline in net FDI, dropping to $10.4 billion from $20.8 billion during the same period last year.

A report from the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) released this month affirmed India’s position as the top recipient of FDI in 2023 for the second consecutive year, even amidst a global economic slowdown.

Additionally, net inflows from external commercial borrowings (ECBs) and non-resident deposit accounts witnessed a substantial increase compared to the previous year. Meanwhile, outward FDI commitments declined, contributing to a rise in foreign exchange reserves.

As of December 15, India’s foreign exchange reserves reached a 20-month high at $615.97 billion, marking the fifth consecutive weekly increase, according to the latest RBI data.

The accumulation of foreign exchange reserves equips the RBI with the means to stabilize the rupee during periods of volatility. This proactive measure involves intervention in the spot and forward currency markets by releasing additional dollars to prevent the rupee from undergoing a sharp decline when faced with pressure.

Maintaining a robust foreign exchange reserve position is crucial for the RBI, ensuring ample flexibility to intervene effectively in the market and safeguard the stability of the Indian rupee.