India's Forex Reserves Fall As Foreign Investors Head For The Exits

[RiazHaq]

India's Forex Reserves Fall As Foreign Investors Head For The Exits

News, analysis and opinions about India, Pakistan, US, Canada, Europe, Mid East, South Asia, Silicon Valley, High Technology, Economy, Politics, World

www.riazhaq.com

India's foreign exchange reserves are falling rapidly as foreign investors flee and the country's trade and current account deficits widen. More than $267 billion worth of India's external debt of the total $621 billion is due for repayment in the next nine months. This repayment is equivalent to about 44% of India's foreign exchange reserves. This combination of investors' exodus, widening twin deficits and short-term debt repayments has caused the Indian rupee to hit new lows. Unlike China and other nations that have accumulated large reserves by running trade surpluses, India runs perennial trade and current account deficits. The top contributor to India's forex reserves is debt which accounts for 48%. Portfolio equity investments known as “hot” money or speculative money flows account for 23% of India's forex reserves, according to an analysis published by The Hindu BusinessLine.

India's Declining Forex Reserves. Source: Business Standard

Investor Exodus:

Foreign portfolio investors have pulled out a whopping $33.5 billion from equity and $2.1 billion from debt segments of Indian financial markets, for a total net outflow of $35.6 billion from October 2021 to June 2022, according to data compiled by the National Securities Depository Limited. In the first half of this calendar year, the total net outflows were $29.7 billion.

It's not just the FPIs leaving India; a number of multinational companies are also pulling foreign direct investment (FDI) from India. Several big names including German retailer Metro AG, Swiss building-materials firm Holcim, US automaker Ford, UK banking major Royal Bank of Scotland, US motorcycle manufacturer Harley-Davidson and US banking behemoth Citibank have chosen to pull the plug on their operations in India or downsize their presence in recent years.

Widening Deficits:

India's finance ministry has warned of a growing twin deficit problem, with higher commodity prices and rising subsidy burden leading to an increase in both the fiscal and current account deficits. India's June trade deficit widened to a record high of $25.63 billion, mainly due to a rise in crude oil and coal imports, from $9.61 billion a year earlier. India's April-May fiscal deficit was $25.8 billion.

Summary:

India's current level of forex reserves is enough for less than 10 months of imports projected for 2022-23. But the country has had a structural current account deficit which has been funded by large capital inflows. The accumulation of forex reserves has been due to surplus in the capital account. Since late February, the foreign exchange reserves have declined by $36 billion. India still has large forex reserves but its economy is in the same boat as other emerging markets that run large and worsening trade and current account deficits. With declining forex reserves, India is likely to face headwinds as the US Federal Reserves raises interest rates to fight inflation.

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India's Forex Reserves Fall As Foreign Investors Head For The Exits

News, analysis and opinions about India, Pakistan, US, Canada, Europe, Mid East, South Asia, Silicon Valley, High Technology, Economy, Politics, World

www.riazhaq.com

 

[MH.Yang]

Inflation in India is now soaring. The CPI has reached 7.8%, which is close to the inflation rate of the USA.

The Indian Rupee exchange rate is accelerating its decline. In just six months, the Indian rupee has fallen from 73 in January to 79 in June. It fell faster than the euro.

India's external trade environment is also deteriorating rapidly. In the first five months of 2022, India's trade deficit reached a record $101 billion. In May this year alone, India's trade deficit reached US $24billion.

India's foreign exchange reserves are only $570billion. In addition, India still has US $620billion in external debt, with a total debt of more than US $1.4 trillion.

Global investors are losing confidence in the Indian economy. In 2021, a record $32billion of investment was withdrawn from the Indian market. In 2021, the loss rate of foreign investment in India was second only to Malaysia and Indonesia.

The unemployment rate in India is gradually rising, with the total unemployment rate exceeding 8% and the urban youth unemployment rate exceeding 22%.

The Indian stock market is also collapsing. The Mumbai 30 index fell by 15% in the first five months of this year, which is the lowest point after the Indian epidemic in 2020.

 

[my2cents]

This was probably anticipated and will be dealt with. We have to see how it is going to impact the people sentiment about the economy.

 

[Beast]

Quickly throw your rupee away and exchange to RMB or USD.

 

[Indos]

Inflation in India is now soaring. The CPI has reached 7.8%, which is close to the inflation rate of the USA.

The Indian Rupee exchange rate is accelerating its decline. In just six months, the Indian rupee has fallen from 73 in January to 79 in June. It fell faster than the euro.

India's external trade environment is also deteriorating rapidly. In the first five months of 2022, India's trade deficit reached a record $101 billion. In May this year alone, India's trade deficit reached US $24billion.

India's foreign exchange reserves are only $570billion. In addition, India still has US $620billion in external debt, with a total debt of more than US $1.4 trillion.

Global investors are losing confidence in the Indian economy. In 2021, a record $32billion of investment was withdrawn from the Indian market. In 2021, the loss rate of foreign investment in India was second only to Malaysia and Indonesia.

The unemployment rate in India is gradually rising, with the total unemployment rate exceeding 8% and the urban youth unemployment rate exceeding 22%.

The Indian stock market is also collapsing. The Mumbai 30 index fell by 15% in the first five months of this year, which is the lowest point after the Indian epidemic in 2020.

Correction, Indonesia FDI keep increasing in 2021, even in 2020 the FDI still increased. Within this first Q12022, FDI increases about 38 % compared to the same period last year.

Unlike Indian economist who keep talking their economy growth will be about 7-8 percent while the reality their GDP in the last 6 months (Q4 2021 and Q1 2022) are just 5.4 and 4.2 %, Indonesian economist projection on Indonesia economy is so far match with the last 6 months GDP data around 5 % (Q4 2021 and Q1 2022 are stable at 5.02 and 5.2 % )

 

[my2cents]

Correction, Indonesia FDI keep increasing in 2021, even in 2020 the FDI still increased. Within this first Q12022, FDI increases about 38 % compared to the same period last year.

Unlike Indian economist who keep talking their economy growth will be about 7-8 percent while the reality their GDP in the last 6 months (Q4 2021 and Q1 2022) are just 5.4 and 4.2 %, Indonesian economist projection on Indonesia economy is so far match with the last 6 months GDP data around 5 % (Q4 2021 and Q1 2022 are stable at 5.02 and 5.2 % )

We are not talking about Indonesia Mr.Think Tank

 

[Indos]

We are not talking about Indonesia Mr.Think Tank

Look the post that I replied, Indian. I corrected his false data about Indonesia FDI

 

[kaykay]

India's external debt to GDP ratio is in check at lower than 20%.
India's forex reserves are roughly the same as Its external debt.
Overall export(commodity plus services) equals overall Import (commodity plus services). Chill. Economically India is stable.

 

[Indos]

India's external debt to GDP ratio is in check at lower than 20%.
India's forex reserves are roughly the same as Its external debt.
Overall export(commodity plus services) equals overall Import (commodity plus services). Chill. Economically India is stable.

Why do you Indian like to lying ? Nope, you still have large deficit even when you put export service and remittance, India gov so far pay the gap ( deficit ) using foreign investment money whether through capital market or FDI

 

[kaykay]

Why do you Indian like to lying ? Nope, you still have large deficit even when you put export service and remittance, India gov so far pay the gap ( deficit ) using foreing investment money whether through capital market or FDI

For FY2021-22, overall deficit was merely 87 billion usd without remittances. Add remittances to that and It offsets that. Official figures.

India’s Services exports for the first time achieve the targeted $ 250 Billion during April-March 2021-22, exhibiting a positive growth of 21.31 per cent over the fiscal 2020-21

India’s Services exports for the first time achieved the targeted $ 250 Billion during April-March 2

pib.gov.in

 

[Indos]

For FY2021-22, overall deficit was merely 87 billion usd without remittances. Add remittances to that and It offsets that. Official figures.

India’s Services exports for the first time achieve the targeted $ 250 Billion during April-March 2021-22, exhibiting a positive growth of 21.31 per cent over the fiscal 2020-21

India’s Services exports for the first time achieved the targeted $ 250 Billion during April-March 2

pib.gov.in

87 billion USD is "merely" ????

 

[Black Tornado]

87 billion USD is "merely" ????

Yes it is, oh, and how much is this as %age of Indonesian economy?

Indonesia’s External Debt Decreased in January 2022

www.bi.go.id

 

[kaykay]

87 billion USD is "merely" ????

Compare the size of economy, remittance etc then yeah. In Fy2020-21, overall deficit was merely 17 billion usd.

 

[maithil]

For FY2021-22, overall deficit was merely 87 billion usd without remittances. Add remittances to that and It offsets that. Official figures.

India’s Services exports for the first time achieve the targeted $ 250 Billion during April-March 2021-22, exhibiting a positive growth of 21.31 per cent over the fiscal 2020-21

India’s Services exports for the first time achieved the targeted $ 250 Billion during April-March 2

pib.gov.in

Hehehe... For some 87 billions might be too big. For India, it's pocket change.

Yes it is, oh, and how much is this as %age of Indonesian economy?

Indonesia’s External Debt Decreased in January 2022

www.bi.go.id

Indonesia is hardly an economy to be used as barometer. Don't bust their bubbles.

 

[SoulSpokesman]

@RiazHaq

Brofessor sb,

We know that you are very concerned about the land of your forebears but rest assured it is in safe hands. There is nothing unusual in forex reserves, CAD etc worsening for India in periods of high crude and commodity prices- we saw that in 2007 and 2012-14 as well, but these cycles tend to correct themselves.

Regards