India Hikes Exposure in April, Becomes 12th Largest Holder of US Govt Securities at $157.4 Billion

India became the 12th largest holder of US government securities at the end of April, with holding worth $157.4 billion, according to official data.

After significantly reducing the exposure in March to $156.5 billion, Indian marginally hiked the holding by $0.9 billion to $157.4 billion the next month, the data from the US Treasury Department showed.

So far this year, there has been no specific trend in terms of such securities bought and sold by India amid global economic uncertainties due to coronavirus pandemic.

While the holding touched a record high of $177.5 billion in February, the same was drastically reduced in March. The exposure stood at USD 164.3 billion in January.

At the end of April, Japan remained the country with the maximum exposure at $1.266 trillion, followed by China ($1.073 trillion) and the UK ($368.5 billion) at the second and third positions, respectively.

At the fourth spot was Ireland (USD 300.2 billion), followed by Luxembourg ($265.5 billion), Brazil ($259.5 billion), Hong Kong ($242.8 billion), Switzerland ($241.3 billion), Belgium ($210.2 billion), Cayman Islands ($206.8 billion) and Taiwan ($201.7 billion), as per the data.

India, which was at the 13th place in March, climbed to the 12th position in April. This was on account of Saudi Arabia coming down to the 15th spot after the major oil producing country drastically trimmed its exposure to $125.3 billion.

At the end of March, Saudi Arabia was at the 12th position with holding worth $159.1 billion. The American government securities are held by the Reserve Bank of India (RBI) as it invests in foreign assets as part of its prudential liquidity management.

Global economic uncertainties have increased in the wake of the pandemic. India too has been impacted and the rupee has been witnessing significant fluctuations in recent months.

Dollars and other US government assets began to be among the preferred ones for investments, with the collapse of the gold standard or the Bretton Woods principles in the late 1970s and central banks moved to the fractional reserves system.

Since then, the US dollar/T-bills have been the safest asset class for any central bank, despite getting one of the lowest returns.