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 the period April-September 2004-05 are now available. These data have been
released on RBI website on December 31, 2004.
Sources of Accretion to Foreign
Exchange Reserves in 2004-05 (April-September)
The following table shows the main
components of accretion to foreign exchange reserves during April-September
2004-05:
Table 1: Sources of Accretion to
Foreign Exchange Reserves
|
(US $ billion)
|
|
Items
|
April-September 2004-05
|
April-September 2003-04
|
|
I.
|
|
Current Account Balance
|
-3.3
|
2.2
|
|
II.
|
|
Capital Account (net) (a to f)
|
10.1
|
11.9
|
| |
a.
|
Foreign Investment
|
2.6
|
5.1
|
| |
b.
|
Banking Capital
|
0.3
|
2.2
|
| |
|
Of which: NRI Deposits
|
-1.3
|
2.2
|
| |
c.
|
Short term credit
|
2.0
|
2.0
|
| |
d.
|
External Assistance
|
0.4
|
-0.2
|
| |
e.
|
External Commercial Borrowings
|
2.1
|
0.2
|
| |
f.
|
Other items in capital account
|
2.7
|
2.6
|
|
III.
|
|
Valuation change
|
-0.2
|
2.1
|
| |
|
Total (I+II+III)
|
6.6
|
16.2
|
Major sources of accretion to foreign
exchange reserves during April-September, 2004-05 have been:
- Foreign investment (39.4 per cent);
- External commercial borrowings (31.8 per cent)
and external assistance (6.1 per cent);
- Short-term credit (30.3 per cent);
- Other items under capital account which mainly
reflect the difference between customs data on imports/exports and banking
channel data, rupee debt service and other transactions, accounted for 40.9
per cent;
- These accretions to the reserves were partly
counterbalanced by a current account deficit of US $ 3.3 billion, net outflows
under NRI deposits at US $ 1.3 billion and valuation loss of US $ 0.2 billion.
Valuation loss, reflecting the
depreciation of the GBP and Yen against the US dollar, accounted for a decline
of US $ 0.2 billion in the total reserves during April-September 2004-05 as
against a valuation gain of US $ 2.1 billion in the corresponding period of
2003-04. While the Reserve Bank denominates its forex reserves in terms of US
dollars, these comprise a basket of major international currencies. Accordingly,
when non-US dollar currencies depreciate vis-à-vis the US dollar,
there is erosion to reserves by way of valuation loss. The reverse is the case
when these currencies appreciate against the US dollar.
Alpana Killawala
Chief General Manager
Press Release : 2004-2005/689