India's foreign exchange reserves are at a record high as inflows into the Indian debt and equity markets remain strong.
Data from the Reserve Bank of India shows that foreign exchange reserves hit $426.42 billion as of June 21, up $4.2 billion from a week ago. At current levels, forex reserves have reclaimed the earlier record high of $426.1 billion hit in April 2018.
Reserves have risen as both equity and debt inflows have picked up following results of the general elections in May.
Foreign investors put in Rs 7,920 crore into equities in May and another Rs 2,596 crore in June. Foreign inflows into debt stood at Rs 1,187 crore in May and Rs 8,319 crore in June.
In addition to portfolio flows through the regular route, the RBI has also tried to encourage longer term debt flows via a ‘Voluntary Retention Route', which incentivises investors to park their money for longer periods.
External commercial borrowings have also been strong. In the January-March quarter, net inflow on account of external commercial borrowings increased to $ 7.2 billion from $ 1.0 billion a year ago, showed Balance of Payments data released by the central bank on Friday.
The RBI absorbs dollars flows in order to prevent excessive appreciation of the rupee. This, in turn, pushes up the country's foreign exchange reserves and adds domestic liquidity into the banking system.
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