Saturday, December 20, 2003
India's forex reserves cross $100-billion mark
Reuters Mumbai, December 20
India's foreign exchange reserves crossed the $100 billion mark for the first time, boosted by foreign investment inflows, trade flows and revaluation gains on the dollar's weakness against global currencies.
"The RBI Governor informed me today that India's foreign exchange reserves comprising foreign currency assets, gold and Special Drawing Rights have reached $100.248 billion on December 19," Finance Minister Jaswant Singh said in a statement.
"The RBI has assured me that these forex reserves will, as in the past, continue to be used to contain volatility in the forex market and to withstand any possible supply shocks."
The reserves will also enable Indian firms to borrow overseas at "finer and more favourable rates", Singh added.
Earlier on Saturday, Reserve Bank of India data showed India's reserves climbed $1.44 billion in the week ended December 12, notching their seventh straight week of gains and extending rises over the past year to $30.5 billion, or nearly 45 per cent.
"The entire rise may not be attributable to money flows, part of it is due to revaluation as the dollar has been depreciating against other currencies," said Siddharth Mathur of JP Morgan.
The RBI said the numbers included the effect of appreciation or depreciation of non-dollar currencies held in the reserves such as the euro, sterling and yen.
The euro has appreciated roughly 19 per cent against the dollar this year and hit record highs against the greenback this week. The sterling and the yen are up around 10 per cent each against the dollar this year.
Finance Secretary DC Gupta told reporters there was "no reason that the Government should not continue with its policy of paying foreign debt ahead of schedule but needed to examine whether it would save on interest".
On Friday, an official said the country would pre-pay $1.3 billion to the Asian Development Bank before end-March.
A senior Government official said earlier this year that India would pre-pay external debt worth nearly $3 billion to more than a dozen countries.
PROBLEM OF PLENTY
Grappling with a problem of plenty, the Government earlier this year also tightened its policy on foreign borrowing by Indian firms in what analysts saw as a move to stem inflows.
Earlier this week, global rating agency Standard and Poor's raised its outlook on the country's foreign currency rating to stable from negative, acknowledging the improvement in reserves, although it kept the rating at a speculative 'BB'.
India is placed sixth in Asia in terms of reserves and its reserves are equivalent to around 20 per cent of its GDP.
The rise in reserves, besides the revaluation gains, reflects heavy intervention by the RBI to mop up inflows from foreign investors, remittances from Indians working overseas and trade flows.
The RBI's intervention is aimed at preventing excessive rises in the rupee, which would affect India's export competitiveness. Despite the intervention, the rupee has risen by around 5.4 per cent against the dollar in 2003.
Foreign funds have made net investments of some $7.1 billion in Indian assets in 2003, their highest annual investment since local markets were opened to foreign funds a decade ago, on expectations Asia's third-largest economy will expand by over seven per cent in the current fiscal year.
Deposits by non-resident Indians rose by $2.6 billion in the first half of the fiscal year which started in April but are expected to have grown more slowly since as the central bank cut rates on such deposits in September.
© Hindustan Times Ltd. 2003.