Key Features of India’s IIP in March 2021
I. Quarterly Variations:
- Net claims of non-residents on India increased by US$ 11.2 billion during Q4:2020-21 to US$ 352.7 billion in March 2021 (Table 1).
- The increase in net claims was due to larger increase in foreign-owned assets in India (US$ 17.9 billion) vis-à-vis the overseas financial assets of Indian residents (US$ 6.7 billion) during the quarter.
- Indian residents’ overseas financial assets abroad increased largely on the back the increase in overseas direct investment as well as currency and deposits.
- Inward portfolio investment and loans were major contributors to the rise in India’s foreign liabilities.
- Depreciation of the Indian rupee against the US dollar during the quarter contributed to changes in India’s liabilities, when valued in the US dollar terms.
- Reserve assets accounted for over two-thirds of India’s international financial assets (Table 3).
- Non-debt liabilities had 52.4 per cent share in India’s external liabilities (Table 4).
II. Annual Variations:
- During 2020-21, non-residents’ net claims on India reduced by US $ 22.7 billion: increase in overseas assets of Indian residents (US$ 141.2 billion) exceeded the rise in foreign owned assets in India (US$ 118.5 billion) (Table 1).
- The increase in international financial assets of Indian residents was led by a large accretion of US$ 99.2 billion in reserve assets; overseas direct investment and currency and deposits were the other major components.
- Inward direct investment and portfolio equity investment together accounted for nearly 90 per cent of the increase in international financial liabilities during 2020-21.
- The ratio of India’s international financial assets to international financial liabilities increased to 70.9 per cent in March 2021 from 65.6 per cent a year ago.
III. Ratio of International Financial Assets and Liabilities to GDP (at current prices):
- The ratios of reserve assets, Indian residents’ overseas financial assets and claims of non-residents on India to GDP at current market prices surged during 2020-21, largely due to the decline in GDP during the year, caused by the COVID-19 pandemic (Table 2).
- The ratio of net IIP of India to GDP also improved to (-) 13.1 per cent in March 2021 from (-) 13.9 per cent a year ago.