The Hindu Business Line : Forex reserves up $49 million

THE growth of India's forex kitty has slowed down further, with an accumulation of a mere $49 million during the week ended May 14, as per the latest statistics of the Reserve Bank of India (RBI). As on this date, total reserves were at $118.828 billion as against $118.579 billion in the previous week ended May 7, according to the weekly statistical supplement (WSS) of the Reserve Bank of India.

The lower reserves accretion for the week ended May 14, follows a net accretion to forex reserves of $89 million in the week ended May 7,2004, which in it itself was lesser than a growth of $ 611 million in the week ended April 30,2004.

The $49 million accretion to the forex reserves as on May 14, can be accounted for by the $70 million growth in foreign currency assets and a dip of $21 million in the reserve position with the International Monetary Fund (IMF).

Foreign currency assets expressed in US dollar terms include the effect of appreciation and depreciation of non-US currencies, such as the Euro, Sterling, Yen etc, held in the reserves, according to the WSS.

As on the week ended May 14,2004, foreign currency assets of the country stood at $113.165 billion, while the Reserve Tranche Position was at $1.270 billion.

As on the week ended May 14, gold reserves remained steady at $4.191 billion, while special drawing rights (SDRs) remained steady at $2 million.

The torrent of dollar inflows has been ebbing over the past few weeks consequent to the mass withdrawal of foreign institutional investors (FII's) from Indian equities. The flight of the FIIs coupled with domestic political uncertainties led to a lot of volatility in the rupee, despite which it closed the week stronger by 24 paise at 45.28 against the dollar on Friday.

Dealers said the RBI has not been very aggressive in mopping up dollar liquidity in the market following the deceleration of dollar inflows over the past few weeks.

On Monday, domestic political uncertainties and fears of a slow down in reforms led the equities market to an unprecedented crash, with the BSE sensex plummeting by 565 points, and the NSE's S&P CNX Nifty tumbling down by 193.65 points.

Analysts are of the view that the crash in the domestic equities market due to the flight of FII's from Indian equities will have an impact in the reserves accretion in the week ended May 21.