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 Q1 of 2007-08 (i.e. April-June 2007) are now available.
These data have been released on RBI website (www.rbi.org.in)
on September 28, 2007. On the basis of these data, sources of accretion to foreign
exchange reserves have been compiled. Sources of Accretion to Foreign
Exchange Reserves: April-June 2007
The main components of accretion
to foreign exchange reserves during Q1 of 2007-08 are set out in the Table.
Table: Sources of Accretion to
Foreign Exchange Reserves
(US $
billion) | Items | April-June
2007 | April-June
2006 | I. | | Current
Account Balance | -4.7 | -4.6 |
II. | | Capital
Account (net) (a to f) | 15.9 | 11.0 |
| a. | Foreign
Investment | 7.9 | 0.9 |
| b. | Banking
Capital | -2.1 | 5.0 |
| |
of which: NRI Deposits | -0.4 | 1.2 |
| c. | Short-term
credit | 1.0 | 0.4 |
| d. | External
Assistance | 0.3 | 0.0 |
| e. | External
Commercial Borrowings | 7.0 | 4.0 |
| f. | Other
items in capital account* | 1.8 | 0.7 |
III. | | Valuation
change | 3.0 | 4.9 |
| | Total
(I+II+III) | 14.2 | 11.3 |
| ‘Other Capital’ apart
from Errors and Omissions’ also includes the leads and lags in export receipts,
funds held abroad, India’s subscription to international institutions, quota
payments to IMF, remittances towards recouping the losses of branches/subsidiaries
and residual item of other capital transactions not included elsewhere. The other
capital transaction not included elsewhere mainly include suppliers’ credit
up to 180 days, flows arising from cross-border financial derivative and commodity
hedging transactions, migrant transfers (i.e., cover the movement of personal
effects and financial assets arising from the change in residence status), and
sale of intangible assets such as patents, copyrights, trademarks, etc. |
Major sources of accretion to foreign exchange reserves
during the Q1 of 2007-08 have been foreign investment, External Commercial Borrowings
(ECBs) and short-term credit. The accretion to the foreign exchange reserves was
US $ 11.2 billion on a BoP basis (excluding valuation effects) during April-June
2007. Valuation gain, reflecting the appreciation of major currencies against
the US dollar, accounted for an increase of US $ 3.0 billion in total reserves
during the Q1 of 2007-08 as against a valuation gain of US $ 4.9 billion during
the corresponding period of previous year. The foreign exchange reserves increased
by an amount of US $ 14.2 billion during April-June 2007 including the valuation
effects against an increase of US $ 11.3 billion during April-June 2006. |