Earlier today, the Reserve Bank of India released the Balance of Payments (BoP) data for Q3 of 2009-10 (October-December 2009) on its website (www.rbi.org.in). On the basis of these data along with the revised data for earlier quarters, this note on sources of variation in foreign exchange reserves during April-December 2009 has been compiled. Sources of Variation in Foreign Exchange Reserves: April-December 2009 During April-December 2009, there was an accretion to foreign exchange reserves mainly on account of valuation gains. Also, inflows under foreign investments, Non-Resident Indian deposits and short-term trade credits have contributed significantly to the increase in foreign exchange reserves during April-December 2009. 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 $ million) |
Items |
April-December 2008 |
April-December 2009 |
I. |
Current Account Balance |
-27,516 |
-30,330 |
II. |
Capital Account (net) (a to f) |
7,136 |
41,630 |
|
a. |
Foreign Investment (i+ii) |
2,975 |
40,134 |
|
|
(i) Foreign Direct Investment |
14,313 |
16,534 |
|
|
(ii) Portfolio Investment |
-11,338 |
23,600 |
| |
|
Of which: |
|
|
|
|
FIIs |
-12,408 |
20,519 |
|
|
ADRs/GDRs |
1,135 |
3,152 |
|
b. |
External Commercial Borrowings |
6,944 |
2,290 |
|
c. |
Banking Capital |
14 |
2,988 |
|
|
of which: NRI Deposits |
2,114 |
3,474 |
|
d. |
Short-Term Trade Credit |
685 |
2,665 |
|
e. |
External Assistance |
1,860 |
1,212 |
|
f. |
Other items in capital account* |
-5,342 |
-7,659 |
III. |
Valuation Change |
-33,375 |
20,185 |
| |
Total (I+II+III) |
-53,755 |
31,485 |
Note: (i) *: ‘Other items in capital account’ apart from ‘Errors and Omissions’ also include SDR allocations, leads and lags in exports, funds held abroad, advances received pending issue of shares under FDI and transactions of capital receipts not included elsewhere. |
(ii) Increase in reserves (+) / Decrease in reserves (-) . |
The foreign exchange reserves (including the valuation effects) increased by US$ 31,485 million during April-December 2009 as against a decline of US$ 53,755 million during April-December 2008 (Table 2).
Table 2: Comparative Position |
(US$ million) |
|
|
April-December 2008 |
April-December 2009 |
1. |
Change in Foreign Exchange Reserves (Including Valuation Effects) |
-53,755 |
31,485 |
2. |
Valuation Effects
[Gain (+)/Loss (-)] |
-33,375 |
20,185 |
3. |
Change in Foreign Exchange Reserves on BoP basis (Excluding Valuation Effects) |
-20,380 |
11,300 |
4. |
Percentage of increase/decline in Reserves explained by Valuation Gain/Loss |
62.1 |
64.1 |
| Note : Increase in reserves (+)/Decrease in reserves (-). |
On balance of payments basis (i.e., excluding valuation effects), the foreign exchange reserves increased by US$ 11,300 million during April-December 2009 as against a decline of US$ 20,380 million during April-December 2008. The valuation gains, reflecting the depreciation of the US dollar against the major currencies, accounted for US$ 20,185 million during April-December 2009 as compared with a valuation loss of US$ 33,375 million during April-December 2008. Accordingly, valuation gains during April-December 2009 accounted for 64.1 per cent of the total increase in foreign exchange reserves. Ajit Prasad
Manager Press Release : 2009-2010/1325 |
