India’s foreign currency assets fell by around $19 billion since April this year in the wake of capital outflows and intervention by the Reserve Bank of India to arrest the decline in the rupee’s value against the dollar. During the week ended June 29, foreign currency assets, a major component of the overall reserves, decreased by $1.781 billion to $380.718 billion, according to Reserve Bank data. As at end-March 2018, the total foreign currency assets were $ 399.44 billion, indicating a decline of $ 19 billion in three months. The RBI had sold dollars to stabilise the rupee which had fallen below 69 level last week. The capital market also witnessed outflows of around Rs 60,000 crore since April this year.
Overall forex reserves which had touched a record high of $426.028 billion in the week ended April 13, 2018 have now fallen $ 20 billion. Foreign exchange reserves declined by $1.757 billion to $406.058 billion in the week ended June 29 owing to fall in foreign currency assets, RBI data showed. In the previous week, reserves had dipped by $2.25 billion to $407.81 billion.
Reserves had crossed the $400-billion mark for the first time in the week ended September 8, 2017, but have since been fluctuating. Meanwhile, the RBI has said India’s volatile capital flows, including cumulative portfolio inflows and outstanding short-term debt, as a ratio to foreign exchange reserves have come down during the nine-month period ended December 2017.
“The ratio of volatile capital flows to foreign exchange reserves declined from 88.1 per cent at end-March 2017 to 86.9 per cent at end-December 2017,” the RBI said in its latest ‘Report on Management of Foreign Exchange Reserves’. At the end of December 2017, the import cover decreased to 10.8 months from 11.3 months at end-March 2017. “The ratio of short-term debt to foreign exchange reserves, which was 23.8 per cent at end-March 2017, remained at the same level at end-December 2017,” it said.
According to the RBI, India’s foreign exchange reserves, when reckoned on balance of payment (BoP) basis (i.e., excluding valuation effects), increased by $ 30.3 billion during April-December 2017 as compared with an increase of $ 14.2 billion during April-December 2016. The foreign exchange reserves in nominal terms (including valuation effects) increased by $ 39.1 billion during April-December 2017 as against the depletion of $ 1.3 billion during the same period of the preceding year.
However, it did not disclose the return on forex assets deployed in the securities of other countries, foreign banks and other central banks. “The valuation gain, mainly reflecting the depreciation of the US dollar against major currencies, amounted to $ 8.8 billion during April-December 2017 as against a loss of $ 15.5 billion during the same period of the preceding year,” it said.