India added $47.5 billion to forex reserves in FY23

India added $47.5 billion to the foreign exchange reserves last fiscal year, down nearly half of the previous year. Nearly $26 billion of those incremental reserves were due to the sanction of Special Drawing Rights by the IMF and the revaluation of gold reserves, according to a drill down of the data. Only 4 billion dollars worth of foreign currency assets were added to the forex kitty after valuation losses. A $17.7 billion addition to the reserves was provided by the International Monetary Fund in terms of SDR allocation and close to $9 billion addition to the value of gold. The gains in foreign currency assets are $20 billion, a one-off $17.4 billion and changes in gold $8.67 billion, even though the SDR gains are a one-off $17.4 billion and $8.67 billion. One way to interpret the moving parts is to see that the gold reserve accretion has been high, so positive valuation effects were seen there, but then FCA related valuation losses are much higher than 17 bn, due to weaker euro, JPY and GBP in the last 12 months, said Rahul Bajoria, chief India economist at Barclays Capital. The foreign currency assets movements are mainly due to purchases and sale of foreign exchange by the RBI, income arising from the deployment of foreign exchange reserves, external aid receipts of the Central Government and changes on account of the revaluation of the assets. Without the support of the IMF, our external sector is strained. Madan Sabnavis, chief economist at, said the current account is changing to deficit balance of payments. FPI is negative and FDI has retained position. There is a weakening of the external account because of the slowdown in the pile-up of reserves, which assumes significance as foreign investment is slowing as central banks of advanced economies raise rates to fight rising inflation and the prospect of a wider current account deficit will put more pressure on the reserves and rupee. Estimates are that the current account deficit could go up to 3.0% of GDP in FY 23 or even higher from 1.2% in FY 22. In FY 23 crude oil prices are expected to average 105 per barrel and a slowdown in global growth, which will cause deterioration in CAD. Export growth and services receipts are likely to be affected by a global growth slowdown. We expect transfers to hold up in FY 23 according to a report by the same company on the other hand.