Sources of Variation in Foreign Exchange Reserves in India during April-September 2018

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Published on December 07, 2018

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Sources of Variation in Foreign Exchange Reserves in India during April-September 2018

Earlier today, the Reserve Bank of India released the balance of payments (BoP) data for July-September 2018 on its website (www.rbi.org.in). On the basis of these data, the sources of variation in foreign exchange reserves during April-September 2018 have been compiled.

Sources of Variation in Foreign Exchange Reserves: April-September 2018

During April-September 2018, there was a decrease in the foreign exchange reserves. The sources of variation in the foreign exchange reserves are set out in Table 1.

Table 1: Sources of Variation in Foreign Exchange Reserves*
(US$ Billion)
Items			2018-19 April-September	2017-18 April-September
I.		Current Account Balance	-35.1	-21.9
II.		Capital Account (net) (a to f)	21.8	42.8
	a.	Foreign Investment (i+ii)	8.0	34.1
		(i) Foreign Direct Investment (FDI)	17.7	19.6
		(ii) Portfolio Investment	-9.8	14.5
		Of which:
		Foreign Institutional Investment (FII)	-11.5	14.4
		ADR/GDR	0.0	0.0
	b.	Banking Capital	10.6	7.0
		Of which: NRI Deposits	6.8	1.9
	c.	Short term credit	1.3	4.6
	d.	External Assistance	0.5	0.8
	e.	External Commercial Borrowings	0.8	-1.6
	f.	Other items in capital account	0.8	-2.0
III.		Valuation change	-10.8	9.3
		Total (I+II+III) @ Increase in reserves (+) / Decrease in reserves (-)	-24.0	30.3
*: Based on old format of BoP which may differ from the new format (BPM6) in the treatment of transfers under the current account and ADRs/ GDRs under portfolio investment. @: Difference, if any, is due to rounding off. Note: ‘Other items in capital account’ apart from ‘Errors and Omissions’ include SDR allocation, leads and lags in exports, funds held abroad, advances received pending issue of shares under FDI and capital receipts not included elsewhere and rupee denominated debt.

On a balance of payments basis (i.e., excluding valuation effects), the foreign exchange reserves decreased by US$ 13.2 billion during April-September 2018 as against an increase of US$ 20.9 billion during April-September 2017. The foreign exchange reserves in nominal terms (including the valuation effects) decreased by US$ 24.0 billion during April-September 2018 as against an increase of US$ 30.3 billion during the same period of the preceding year (Table 2).

Table 2: Comparative Position of Variation in Reserves
(US$ Billion)
Items		2018-19	2017-18
Items		April-September	April-September
1	Change in Foreign Exchange Reserves (Including Valuation Effects)	-24.0	30.3
2	Valuation Effects (Gain (+)/Loss (-))	-10.8	9.3
3	Change in Foreign Exchange Reserves on BoP basis (i.e., Excluding Valuation Effects)	-13.2	20.9
Note: Increase in reserves (+)/Decrease in reserves (-). Difference, if any, is due to rounding off.

The valuation loss, mainly reflecting the appreciation of the US dollar against major currencies, amounted to US$ 10.8 billion during April-September 2018 as against a gain of US$ 9.3 billion during the same period of the preceding year.

Jose J. Kattoor
Chief General Manager

Press Release : 2018-2019/1330