The Hindu Business Line : ECBs form 32 pc of forex inflows

EXTERNAL commercial borrowings (ECBs) were one of the main sources, contributing 31.8 per cent of accretion to India's foreign exchange reserves during the April-September 2004 period.

They contributed $2.1 billion ($0.2 billion) to foreign exchange reserves during the first six months of the current fiscal.

Total accretion for the first half period was $6.9 billion taking the reserves (excluding valuation changes) to $119.6 billion at the end of September.

India held the sixth largest stock of reserves in the world, the Reserve Bank of India said on Friday.

However, valuation loss accounted for a decline of $0.2 billion in the total reserves during the April-September 2004 period against a valuation gain of $2.1 billion in the corresponding period of 2003-2004. Valuation loss reflects the depreciation of the pound and Yen against the dollar.

According to RBI, major sources of accretion to foreign exchange reserves during April-September 2004 were foreign investment, external commercial borrowings, external assistance and short-term credit. 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 40.9 per cent.

However, these accretions to the reserves were partly counterbalanced by a current account deficit of $3.3 billion, net outflows under NRI deposits at $1.3 billion and a valuation loss of $0.2 billion.

While the RBI denominates its forex reserves in terms of US dollars, these comprise a basket of major international currencies. Accordingly, when non-US dollar currencies depreciate vis-à-vis the US dollar, there is erosion to reserves by way of valuation loss. The reverse is the case when these currencies appreciate against the US dollar.

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