India's Balance of Payments Surges Amid Robust Capital Inflows

India's Balance of Payments improved significantly in Q2 FY25, with a capital account surplus rising to USD 11.9 billion due to strong inflows from Foreign Portfolio Investments, External Commercial Borrowings, and Non-Resident Indian deposits, despite increased Foreign Direct Investment outflows. Key contributors included a sharp rise in FPI inflows.

India's Balance of Payments experienced a notable resurgence in the second quarter of FY25, as a Bank of Baroda report highlights. The capital account surplus climbed to USD 11.9 billion, from USD 10.3 billion a year prior, driven by strong infusions from Foreign Portfolio Investments, External Commercial Borrowings, and Non-Resident Indian deposits.

The report disclosed that India's balance of payments recorded a remarkable accretion of USD 18.6 billion in Q2 FY25, starkly higher than the USD 2.5 billion recorded in Q2 FY24. This was primarily fueled by substantial inflows from FPIs, ECBs, and NRI deposits, even as Foreign Direct Investment outflows rose to USD 2.2 billion, compared to USD 0.8 billion in the previous year.

FPI inflows were a significant factor, surging to USD 19.9 billion, a sharp increase from USD 4.9 billion in the corresponding period last year. Likewise, NRI deposits more than doubled, hitting USD 6.2 billion, up from USD 3.2 billion in Q2 FY24. Net inflows from ECBs saw a strong recovery, reaching USD 5 billion—reversing the net outflows of USD 1.9 billion recorded last year.

These improvements are attributed to heightened investor confidence and positive global financial dynamics, providing essential support to India's external stance amidst existing economic challenges such as current account deficits and trade balance issues. The robust performances of FPIs, ECBs, and NRI deposits have significantly reinforced India's external financial resilience.

The developments underscore India's ability to navigate global economic uncertainty, with a substantial surplus reported in its latest BoP figures, signifying the strength and resilience of the country's external sector.

(With inputs from agencies.)