We continue to project a BoP surplus of around $40-50bn, despite a paltry $5bn inflow in Q1. Consequently, foreign exchange reserves could scale up to $700bn by the end of this fiscal. There have been queries on the adequate level of foreign exchange reserves, given that holding them is not without cost. But as India has also been included in a couple of emerging market bond indices, it lends additional volatility to dollar capital inflows in the future and the Reserve Bank of India (RBI) may desire to have an additional war chest to manage these volatilities. Further, from a reserve money and liquidity point of view, a Rs 3-4trn of RBI’s balance sheet accretion (purely due to foreign exchange assets build-up) is entirely manageable.