India's External Assets Outpace Liabilities, Reports RBI

India's external assets have increased at a faster rate than its liabilities from June 2023 to June 2024, a recent report from the Reserve Bank of India (RBI) showed.

The report details India's International Investment Position (IIP) as of the end of June 2024, showing that external assets rose by USD 108.4 billion over the year, while external liabilities grew by USD 97.7 billion. It said, "During the period between end-June 2023 and end-June 2024, the external assets increased by USD 108.4 billion and external liabilities increased by USD 97.7 billion."

Despite this growth, India's net IIP, which indicates the difference between external assets and liabilities, remained negative at USD 368.3 billion at the end of June 2024. However, this marks an improvement from the net IIP of USD -379.0 billion recorded at the end of June 2023, reflecting a narrowing gap as external assets have expanded more rapidly than liabilities. It said, "The net IIP as at end-June 2024 was negative at USD 368.3 billion."

The RBI report also highlights the composition of India's foreign currency assets (FCA), which are a part of the country's external reserves. These assets are diversified across multiple currencies and asset portfolios, adhering to international best practices. A significant portion, USD 515.30 billion or 83.51 percent of the FCA, was invested in securities, supporting both stability and long-term growth.

Additionally, USD 60.11 billion, or 9.74 percent of the FCA, was held in deposits with other central banks and the Bank for International Settlements (BIS). The report said, "As at end-September 2024, out of the total FCA of USD 617.07 billion, USD 515.30 billion was invested in securities, USD 60.11 billion was deposited with other central banks."

This allocation not only maintains liquidity but also serves as a dependable reserve for India's foreign exchange requirements. Overall, the report indicates a positive trend in India's external financial position, with assets growing at a faster rate than liabilities, thereby reducing the negative net IIP year-on-year.

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