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Earlier today, the Reserve Bank of India released the Balance of Payments (BoP) data for January-March 2014 on its website (www.rbi.org.in). On the basis of these data, the sources of variation in foreign exchange reserves during 2013-14 have been compiled.
Sources of Variation in Foreign Exchange Reserves: 2013-14
During 2013-14, there was an increase in the foreign exchange reserves. The sources of variation in the foreign exchange reserves are set out in Table 1.
Table 1: Sources of Variation to Foreign Exchange Reserves* | ||||
(US$ billion) | ||||
Items | 2012-13 | 2013-14 | ||
I. | Current Account Balance | -88.2 | -32.4 | |
II. | Capital Account (net) (a to f) | 92.0 | 47.9 | |
a. | Foreign Investment | 46.7 | 26.4 | |
of which: Foreign Direct Investment | 19.8 | 21.6 | ||
Portfolio Investment | 26.9 | 4.8 | ||
FII | 27.6 | 5.0 | ||
ADR/GDR | 0.2 | 0.02 | ||
b. | Banking Capital | 16.6 | 25.4 | |
Of which: NRI Deposits | 14.8 | 38.9 | ||
c. | Short term credit | 21.7 | -5.0 | |
d. | External Assistance | 1.0 | 1.0 | |
e. | External Commercial Borrowings | 8.5 | 11.8 | |
f. | Other items in capital account | -2.5 | -11.7 | |
III. | Valuation change | -6.2 | -3.3 | |
Total (I+II+III) @ | -2.4 | 12.2 | ||
*: Based on old format of BoP | ||||
On balance of payments basis (i.e., excluding valuation effects), the foreign exchange reserves increased by US$ 15.5 billion during 2013-14 as compared to an increase of US$ 3.8 billion during 2012-13. The foreign exchange reserves in nominal terms (including the valuation effects) increased by US$ 12.2 billion during 2013-14 as against a decline of US$ 2.4 billion during the same period of preceding year (Table 2).
Table 2: Comparative Position of Variation in Reserves | |||
(US$ billion) | |||
Items | 2012-13 | 2013-14 | |
1 | Change in Foreign Exchange Reserves | -2.4 | 12.2 |
2 | Valuation Effects | -6.2 | -3.3 |
3 | Change in Foreign Exchange Reserves on BoP basis | 3.8 | 15.5 |
Note: Increase in reserves (+)/Decrease in reserves (-). | |||
The valuation loss, reflecting the cross currency movements and the decline in gold prices, amounted to US$ 3.3 billion during 2013-14 as compared to a valuation loss of US$ 6.2 billion in the previous year.
Alpana Killawala
Principal Chief General Manager
Foreign exchange reserves variation shows net increase driven by capital account inflows despite valuation losses from currency and gold movements. Reserve variation in 2013-14 was driven by net capital account inflows - chiefly foreign investment and banking capital including NRI deposits - which more than offset a moderated current account deficit; valuation changes from cross currency movements and falling gold prices produced a loss that lowered but did not eliminate the overall increase in foreign exchange reserves on both nominal and balance of payments bases. of Press 'Enter' after typing page number.
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