Mumbai, May 16 (IANS): Depreciation in dollar value and intervention by the country’s apex bank to arrest the slide in rupee value led to a slower growth in India’s foreign exchange reserves in the week just ended.
According to the data furnished by the Reserve Bank of India (RBI) in its weekly statistical supplement, India’s total foreign exchange reserves grew by $262.4 million to touch a new record high of $352.13 billion for the week ended May 8, 2015.
For the week ended May 1, the reserves had rocketed by $7.26 billion and touched a new record high of $351.86 billion. The week before that the reserves had reached $344.6 billion, when it grew by $1.4 billion.
Foreign exchange reserves have increased by close to $25 billion since January as overseas investors buoyed by the hope of economic revival poured in dollars in the local debt and equities market.
“Though the reserves have grown and touched a new high, the rate of increase has slowed due to a combination of factors like depreciation in the dollar value and the intervention by the Reserve Bank of India (RBI) to stop the fall in the rupee value,” Anindya Banerjee, senior manager for currency derivatives with Kotak Securities told IANS.
Since the last two weeks RBI has been interviening in the forward trading market by selling dollar to arrest the fall in the rupee value. The rupee value was impacted by the significant pull-back of foreign funds due to the minimum alternate tax (MAT) issue.
Some estimates point-out that the RBI may have sold nearly $5-6 billion in the forward trading market to arrest the slide in the rupee value which currently stood at Rs.63.43 per dollar.
According to Banerjee, the other reasons for the slowing growth of reserves was the fact that exports to the commodity driven economies were negatively impacted.
“Exports to economies which are dependent on the sale of raw commodities or crude oil have been impacted by the low prices of their exports. This has led to a slow-down in our exports to these markets,” Banerjee said.
The RBI continues to build-up the reserves to counter any future financial shocks and further slide in rupee value like the one which was witnessed in June 2013.
“Apart from dealing with any future financial shocks like the one which was earlier triggered by the US Fed’s announcement of tapering, the healthy state of reserves has acted as a support to the Indian rupee’s value,” Banerjee added.
The RBI is cautious about the US Fed’s stand that the rate hike might take place in the later part of the year.
With higher interest rates in the US, the foreign portfolio investors (FPIs) are expected to be led away from the emerging markets such as India.
The US Fed had earlier dropped an assurance to be “patient” in raising interest rates and signalled the hike could come by mid to late this year.
Meanwhile, the foreign currency assets (FCAs) which forms the largest component of the forex reserves grew by $262.7 billion and stood at $327.41 billion in the week under review.
The country’s gold reserves remained stagnant at $19.33 billion. The reserves had augmented by $297.7 million during the week ended May 1.
However, the special drawing rights (SDRs) were marginally down by $0.2 million to $4.06 billion.
The country’s reserve position with the International Monetary Fund (IMF) slipped by 0.1 million.