Today, the Reserve Bank released data relating to India’s International Investment Position (IIP) for end-March 2022[1].
Key Features of India’s IIP in end-March 2022
Quarterly Variations:
- Net claims of non-residents on India increased by US$ 5.6 billion during Q4:2021-22 to US$ 359.8 billion in March 2022.
- This rise in net claims was due to larger decline in the Indian residents’ overseas financial assets [US$ (-)7.3 billion] when compared to the decline in foreign-owned assets in India [US$ (-)1.7 billion] (Table 1).
- Foreign assets of Indian residents declined during Q4:20221-22, mainly due to a decrease of US$ 26.3 billion in reserve assets even as direct, portfolio and other investments, such as, trade credit and currency and deposits increased during the period.
- Even though reserve assets declined during the quarter, it accounted for around two thirds of India’s international financial assets (Table 3).
- The decline in India’s foreign liabilities during the quarter is attributed to reduction in portfolio investment as well as currency and deposits.
- Variation in the exchange rate of rupee vis-a-vis other currencies had a significant impact on the change in liabilities, when valued in US$ terms, as the rupee depreciated by 2.02 per cent during the quarter.
- The share of debt liabilities in total external liabilities increased marginally to 49.2 per cent as at end-March 2022 from 48.5 per cent a quarter ago (Table 4).
Annual Variations
- During 2021-22, non-residents’ net claims on India increased by US$ 4.6 billion: increase in foreign owned assets in India (US$ 65.8 billion) exceeded the rise in overseas assets of Indian residents (US$ 61.1 billion) (Table 1).
- International financial assets of Indian residents increased primarily due to increase in reserve assets (US$ 30.3 billion), direct investment (US$ 17.7 billion) and trade credits (US$ 13.0 billion).
- In spite of a decline of US$ 16.1 billion in portfolio investment during the financial year, international financial liabilities increased on the back of large rise in direct investment in India (US$ 39.6 billion) and other investments (US$ 42.4 billion).
- Variation in the exchange rate of rupee vis-a-vis other currencies affected change in liabilities, when valued in US$ terms.
- The ratio of India’s international financial assets to international financial liabilities increased to 71.9 per cent in March 2022 from 70.8 per cent a year ago.
Ratio of International Financial Assets and Liabilities to GDP (at current prices):
- As a ratio to GDP at current market prices, India’s reserve assets, residents’ financial assets as well as claims of non-residents on India declined during 2021-22 (Table 2).
- The ratio of net claims of non-residents on India to nominal GDP improved to (-)11.6 per cent in March 2022 from (-)13.2 per cent a year ago.
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