• The Reserve Bank of India reports a surge in non-resident Indian (NRI) deposits, reaching a record $11.9 billion.
• The country's forex reserves have bounced back, reflecting strong economic fundamentals and providing stability for the rupee.
• The surge in NRI deposits, robust remittance inflows, and strong forex reserves all point to a resilient Indian economy.

The Reserve Bank of India (RBI) has reported a significant surge in non-resident Indian (NRI) deposit accounts. The inflow reached a record $11.9 billion during the April-October period of the current fiscal year. This figure is nearly double the $6.1 billion recorded during the same period last year. The total outstanding NRI deposits as of October 2024 have now risen to $162.7 billion, a significant increase from $143.5 billion during the same period last year.

The NRI deposit schemes encompass foreign currency non-resident (FCNR) deposits, non-resident external (NRE) deposits, and non-resident ordinary (NRO) deposits. The data reveals that FCNR (B) deposits attracted the highest flows, amounting to $6.1 billion, nearly three times the $2.1 billion deposited during the same period last year. The total amount in these accounts now stands at $31.87 billion.

These accounts are favored by Indians working overseas as they can maintain fixed deposits ranging from one to five years, enabling them to earn higher interest. Since these accounts are in foreign currency, these deposits are safeguarded against fluctuations in the rupee.

India's Position in Global Remittances

According to the latest figures compiled by World Bank economists, India tops the list of recipient countries for remittances in 2024 with an estimated inflow of $129 billion. The growth rate of remittances this year is estimated to be 5.8 percent, compared to 1.2 percent registered in 2023. The recovery of the job markets in the high-income countries of the Organisation for Economic Co-operation and Development (OECD), following the onset of the COVID-19 pandemic, has been the key driver of remittances.

India remains the top recipient of remittances in 2024 with an estimated inflow of $129 billion, followed by Mexico ($68 billion), China ($48 billion), Philippines ($40 billion), and Pakistan ($33 billion). The growth rate of remittances this year is estimated to be 5.8 percent, compared to 1.2 percent registered in 2023. The recovery of the job markets in high-income countries, particularly in the United States, where the employment of foreign-born workers has recovered steadily and is 11 percent higher than the pre-pandemic level seen in February 2020, has been the key driver of remittances.

India also has the world's largest skilled workforce, with many talented Indian doctors, IT specialists, scientists, professors, economists, journalists, engineers, and managers working globally. According to the United Nations' International Migration Highlights, India has the largest diaspora in the world, with 35.42 million Indians living outside their homeland. The United Arab Emirates (UAE), US, Saudi Arabia, and Malaysia host the largest number of migrants from India.

Forex Reserves and Economic Stability

The country's forex reserves had contracted by $1.71 billion to $652 billion for the week ending on June 28 but have bounced back to resume the rising trend of previous weeks. An increase in the foreign exchange reserves reflects strong fundamentals of the economy and gives the RBI more headroom to stabilize the rupee when it turns volatile. Conversely, a declining forex reserve leaves the RBI with less room to intervene in the market to prop up the rupee.

RBI Governor Shaktikanta Das had recently said that India's external sector remains resilient and overall the central bank remains confident of meeting the country's external financing requirements comfortably. India's current account deficit declined to US$ 23.2 billion (0.7% of GDP) during 2023-24 from US$ 67.0 billion (2.0% of GDP) during the previous year due to a lower merchandise trade deficit which reflects a robust external balance position, according to RBI data released on June 24 this year.

The RBI data also showed that India's current account balance recorded a surplus of US$ 5.7 billion (0.6% of GDP) in the Jan-March quarter of 2023-24 as against a deficit of US$ 8.7 billion (1.0% of GDP) in the preceding Oct-Dec quarter of 2023-24 and US$ 1.3 billion (0.2% of GDP) the fourth quarter of 2022-23, reflecting an improvement in the country's macroeconomic position. Commerce Ministry data shows that India's exports of goods shot up over 9 percent in May, paving the way for a stronger balance of payments position.