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Journalism of Courage
MUMBAI, JULY 4: The foreign exchange reserves of the country have fallen by $ 1.2 billion in June. With this the reserves have fallen by over $ 2 billion out of which forex assets alone have dipped by $ 1.8 billion in the first three months of the current financial year.
The erosion has taken place primarily because of a $ 208-million outflow in June by foreign institutional investors (FIIs) and the revaluation of the non-US currencies held in the reserves by the Reserve Bank of India (RBI). The revaluation is primarily because of the fall in the yen’s value against the dollar.
As per the Weekly Statistical Supplement issued by the Reserve Bank today, the foreign currency reserves have dipped by $ 258 million during the week ended June 26. The reason for the fall in the reserves is because of a $ 219-million fall in the foreign currency assets of the Reserve Bank. While the gold reserves have remained unchanged the SDRs have fallen by $ 39 million. Sources said that this was on account of repayments dueto the International Monetary Fund. About $ 600 million is outstanding as on December 1998 to the IMF, analysts say.
However, the central bank has not used much of its dollar reserves to prop up the rupee against the dollar.
“RBI has been following a hands-off policy in the forex market allowing market forces to determine the direction of the rupee. Finance Minister Yashwant Sinha has also gone on record saying that forex reserves would not be used to strengthen the rupee,” said a forex dealer.
The Government is expecting a dollar inflow of $ 2 billion through the proposed Resurgent India Bonds (RIB) issue. State Bank of India which will be launching the scheme for non-resident Indians by the middle of July has fixed an interest rate of 7.75 per cent. It has several tax breaks comparable to the FCNR (B) scheme.
Bankers don’t expect any major inflow of dollars in view of the sanctions and downgrading by global rating agencies. Moreover, Indian companies are not expected to go abroad for GlobalDepository Receipts/American Depository Receipts issues in the near future as the appetite for Indian shares is at a low level now. In fact, many public sector companies like IOC, GAIL and Concor have prepared the groundwork for overseas issues. When the rupee fell below the 43 level against the dollar, forex remittances by exporters and corporates had risen.
