Sources of Variation in Foreign Exchange Reserves in India During April-December of 2010-11

By RBI
Thursday, March 31, 2011
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Earlier today, the Reserve Bank of India released the Balance of Payments (BoP) data for Q3 of 2010-11 (October-December 2010) on its website (www.rbi.org.in (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 2010 has been compiled.

Sources of Variation in Foreign Exchange Reserves: April-December 2010

During April-December 2010, there was an accretion to the foreign exchange reserves.The sources of variation in the foreign exchange reserves are set out in Table 1 (#1) .

Table 1: Sources of Variation in Foreign Exchange Reserves

(US $ billion)

Items

2009-10

2010-11

 

April-December

April-December

I.

 

Current Account Balance

-25.5

-38.9

II.

 

Capital Account (net) (a to f)

36.8

50.0

 

a.

Foreign Investment (i+ii)

39.0

37.7

 

 

       (i) Foreign Direct Investment

15.4

7.6

 

 

      (ii) Portfolio Investment

23.6

30.1

 

 

Of which:

 

 

 

 

       FIIs

20.5

29.5

 

 

      ADRs/GDRs

3.2

1.8

 

b.

External Commercial Borrowings

2.4

9.3

 

c.

Banking Capital

3.0

5.7

 

 

     of which: NRI Deposits

3.5

2.3

 

d.

Short-Term Trade Credit

3.1

8.5

 

e.

External Assistance

1.9

4.2

 

f.

Other Items in Capital Account*

-12.6

-15.4

III.

 

Valuation Change

20.2

7.3

 

 

Total (I+II+III) @

31.5

18.3

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 (-).
@: Difference, if any, is due to rounding off.

On a balance of payments basis (i.e., excluding valuation effects), the foreign exchange reserves increased by US$ 11.0billion during April-December 2010 as compared with an increase of US$ 11.3billion during April-December 2009. The foreign exchange reserves (including the valuation effects) increased by US$18.3 billion during April-December 2010 as compared with an increaseof US$ 31.5 billion during April-December 2009 (Table 2 (#2) ).

Table 2: Comparative Position

(US$ billion)

Items

2009-10
April-December

2010-11
April-December

1.

Change in Foreign Exchange Reserves
(Including Valuation Effects)

31.5

18.3

2.

Valuation Effects
 (Gain (+)/Loss (-))

20.2

7.3

3.

Change in Foreign Exchange Reserves on BoP basis
(i.e., Excluding Valuation Effects)

11.3

11.0

4.

Percentage of increase/decline in Reserves
explained by Valuation Gain/Loss 

64.1

39.9

Note: Increase in reserves (+)/Decrease in reserves (-).

The valuation gains, reflecting the depreciation of the US dollar against major currencies, accounted for US$ 7.3 billion during April-December 2010 as compared with valuation gains of US$ 20.2 billion during April-December 2009. Accordingly, valuation gains accounted for 39.9 per cent of the total increase in foreign exchange reserves during April-December 2010.

Alpana Killawala
Chief General Manager

Press Release : 2010-2011/1413
Filed under: Finance

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