Background The
Reserve Bank of India (RBI) had, on January
31, 2003, issued a Press Note on conclusions of a study conducted by its Department
of Economic Analysis and Policy (DEAP) on Sources of Accretion to Foreign Exchange
Reserves during April-November 2002. Subsequent to this, the RBI has been
regularly updating and releasing information on ‘Sources of Accretion to Foreign
Exchange Reserves’ through press releases which are available on the RBI website
(www.rbi.org.in).
Balance
of payments (BoP) data for April-September 2008 are now available. These data
have been released on RBI website (www.rbi.org.in)
on December 31, 2008. On the basis of these data, sources of variation in foreign
exchange reserves have been compiled. Sources
of Variation in Foreign Exchange Reserves: April-September 2008 During
April-September 2008, there was a decline in foreign exchange reserves. The main
components of reserve change during April-September 2008 are set out in the Table.
Table: Sources of Variation in
Foreign Exchange Reserves
| Items |
April-September 2008 |
April-September 2007 |
| I. |
|
Current Account Balance |
-22,332 |
-10,977 | |
II. |
|
Capital Account (net) (a to f) |
19,833 |
51,413 | |
|
a. |
Foreign Investment (i+ii) |
9,036 |
23,305 | |
|
|
(i) Foreign Direct Investment |
14,557 |
4,864 | |
|
|
(ii) Portfolio Investment |
-5,521 |
18,441 | |
|
b. |
Banking Capital |
4,827 |
5,724 | |
|
|
of which: NRI Deposits |
1,073 |
-78 | |
|
c. |
Short-Term Credit |
3,173 |
6,589 | |
|
d. |
External Assistance |
869 |
709 | |
|
e. |
External Commercial Borrowings |
3,341 |
11,163 | |
|
f. |
Other items in capital account* |
-1,413 |
3,923 | |
III. |
|
Valuation Change |
-20,888 |
8,147 | |
|
|
Total (I+II+III) |
-23,387 |
48,583 | |
*: Items under ‘Other Capital’ apart
from Errors and Omissions’ also include leads and lags in export, funds held abroad,
advances received pending issue of shares under FDI and transactions of capital
receipts not included elsewhere. |
The
foreign exchange reserves have declined by an amount of US $ 23,387 million during
April-September 2008 including the valuation effects as compared with an increase
of US $ 48,583 million during April-September 2007. On a BoP basis (excluding
valuation effects), the decline in the foreign exchange reserves was US $ 2,499
million during April-September 2008. Valuation loss, reflecting the depreciation
of major currencies against the US dollar, accounted for US $ 20,888 million in
total reserves during April-September 2008 as against a valuation gain of US $
8,147 million during the corresponding period of previous year. The valuation
loss explained 89.3 per cent of decline in reserves during April-September 2008.
Apart from current account deficits, outflows under FIIs were the other major
sources contributing to decline in foreign exchange reserves during April-September
2008. Alpana Killawala
Chief General Manager Press
Release : 2008-2009/996 |