India's Balance of Payments (BoP) showed notable improvement in the second quarter of FY25, fueled by strong capital inflows from Foreign Portfolio Investments (FPIs), External Commercial Borrowings (ECBs), and deposits from Non-Resident Indians (NRIs), as reported by the Bank of Baroda. The surplus in the capital account increased to $11.9 billion in Q2 FY25, compared to $10.3 billion during the same quarter last year. The report noted, “India's balance of payments saw an increase of $18.6 billion in Q2 FY25, in contrast to $2.5 billion in Q2 FY24. This was aided by significant inflows from FPIs, ECBs, and NRI deposits.”
Even though Foreign Direct Investment (FDI) outflows rose to $2.2 billion in Q2 FY25 from $0.8 billion in Q2 FY24, other elements of the capital account exhibited impressive growth. FPIs played a crucial role, as inflows skyrocketed to $19.9 billion in Q2 FY25, up from $4.9 billion in the same period last year. Likewise, NRI deposits experienced a substantial increase, more than doubling to $6.2 billion from $3.2 billion a year earlier. ECBs also showed a strong recovery, achieving net inflows of $5 billion in Q2 FY25, a marked rebound from net outflows of $1.9 billion in Q2 FY24.
The report credited this impressive performance to heightened investor confidence and favorable conditions in global finance, which have strengthened India’s external position. Although there are ongoing challenges such as the current account deficit and trade imbalances, these capital inflows have provided essential support to India’s BoP. The significant surplus recorded in Q2 FY25 emphasizes the resilience of the nation’s external sector in the face of global economic uncertainties.
India’s enhanced BoP signifies the role of capital inflows in stabilizing external finances, further boosting investor confidence regarding the country's economic prospects.
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