The Hindu Business Line : Foreign investments account for 40% of reserves accretion

FOREIGN investment flows constituted around 40.1 per cent of the total accretion to the foreign exchange reserves during the nine-months ended April-December 2004-05, as per the latest RBI statistics.

External commercial borrowings accounted for 22.5 per cent, external assistance 3.8 per cent, and short-term credit 14.8 per cent.

Valuation gain, reflecting the appreciation of the sterling and the euro against the US dollar, accounted for an increase of $4.8 billion in the total reserves during April-December 2004-05 as against a valuation gain of $5.8 billion in the corresponding period of 2003-04, said an RBI press release.

While the Reserve Bank denominates its forex reserves in terms of US dollars, these comprise a basket of major international currencies. Accordingly, when non-US dollar currencies appreciate vis-à-vis the US dollar, there is an addition to reserves by way of valuation gain. The reverse is the case when these currencies depreciate against the US dollar, the release said.

Other items under capital account, which mainly reflect the difference between customs data on imports-exports and banking channel data, rupee debt service and other transactions, accounted for 23.6 per cent.

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