Foreign Direct Investment Surges to Highest Level in 21 Months in October

The data indicates that a significant portion of the gross FDI inflows into equity targeted key sectors like manufacturing, retail, energy, and financial services. Leading the pack in contributing to this inflow were countries such as Mauritius, Singapore, Cyprus, and Japan, collectively accounting for four-fifths of the total FDI during the month.

However, when considering data for the April-October period of the current fiscal year, there is a noticeable dip in net FDI inflows, totaling $10.4 billion compared to $20.8 billion during the same period last year.

In a broader global context, India stands out as the highest recipient of FDI in 2023 for the second consecutive year, as per data released by the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP).

Additionally, external commercial borrowings (ECBs) and non-resident deposit accounts have seen a significant uptick compared to the previous year, while outward FDI commitments have declined. This trend has contributed to higher foreign exchange reserves, which, as of December 15, reached a 20-month high at $615.97 billion, marking the fifth consecutive week of increase.

The surge in foreign exchange reserves is crucial for the Reserve Bank of India (RBI) to effectively manage the stability of the rupee in the face of volatility. With this increased reserve, the RBI has the capacity to intervene in currency markets by releasing additional dollars to prevent abrupt depreciation of the rupee under pressure.

This positive development bodes well for India’s economic resilience, offering the RBI the necessary tools to navigate and stabilize the currency in the ever-changing global economic landscape.