Sources of Variation in Foreign Exchange Reserves in India during April-September 2022

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Published on December 29, 2022

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Sources of Variation in Foreign Exchange Reserves in India during April-September 2022

Earlier today, the Reserve Bank of India released balance of payments (BoP) data for July-September 2022 on its website (www.rbi.org.in). On the basis of these data, the sources of variation in foreign exchange reserves during April-September 2022 are detailed below.

Sources of Variation in Foreign Exchange Reserves: April - September 2022

During April-September 2022, there was a decrease in the foreign exchange reserves, the sources of which are set out in Table 1.

Table 1: Sources of Variation in Foreign Exchange Reserves*
(US$ Billion)
Items			April-September 2022	April-September 2021
I.		Current Account Balance	- 54.6	- 3.2
II.		Capital Account (net) (a to f)	28.8	66.2
	a.	Foreign Investment (i+ii)	11.9	24.5
		(i) Foreign Direct Investment (FDI)	20.0	20.3
		(ii) Portfolio Investment	- 8.1	4.3
		of which:
		Foreign Institutional Investment (FII)	- 7.8	4.9
		ADR/GDR	0.0	0.0
	b.	Banking Capital	10.6	4.4
		of which: NRI Deposits	2.8	1.7
	c.	Short term credit	10.2	4.3
	d.	External Assistance	2.3	1.4
	e.	External Commercial Borrowings	- 3.0	5.0
	f.	Other items in capital account	- 3.2	26.6
III.		Valuation change	- 48.9	- 4.7
		Total (I+II+III) @ Increase in reserves (+) / Decrease in reserves (-)	- 74.6	58.4
*: Based on the 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’ includes 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) foreign exchange reserves depleted by US$ 25.8 billion during April-September 2022 as against an accretion of US$ 63.1 billion during April-September 2021. Foreign exchange reserves in nominal terms (including valuation effects) decreased by US$ 74.6 billion during April-September 2022 as against an increase of US$ 58.4 billion in the corresponding period of the preceding year (Table 2).

Table 2: Comparative Position of Variation in Reserves
(US$ Billion)
Items		April-September 2022	April-September 2021
1	Change in Foreign Exchange Reserves (Including Valuation Effects)	- 74.6	58.4
2	Valuation Effects [Gain (+)/Loss (-)]	- 48.9	- 4.7
3	Change in Foreign Exchange Reserves on BoP basis (i.e., Excluding Valuation Effects)	- 25.8	63.1
Note: Increase in reserves (+)/Decrease in reserves (-). Difference, if any, is due to rounding off.

The valuation loss, reflecting the appreciation of the US dollar against major currencies and higher bond yields, amounted to US$ 48.9 billion during April-September 2022 as compared to a valuation loss of US$ 4.7 billion during April-September 2021.

(Yogesh Dayal)
Chief General Manager

Press Release: 2022-2023/1454