Forex Reserves Fell By US $ 1.52 Billion During The Week - Nov 15, 2008

India foreign exchange reserves declined by US $ 1.52 billion during the week ended 7th November 2008, as per the RBI’s Weekly Statistical Statement. However, fall in reserves was bit moderate during the week compared to sharp fall of US $5.53 billion and US $15.47 billion dollar in the previous two weeks. The aggregate foreign exchange (including foreign currency assets, Gold, SDRs, and reserve position in IMF) reserves stood at US $ 251.36 billion compared to US $ 270.18 billion year ago and US $ 309.72 billion as on end March 2008.

As per the RBI’s monthly bulletin for November 2008, total foreign investment inflows into the India dipped 46.16% to US $13.8 billion in April-September 2008 compared to strong inflows of US $25.66 billion inflows in the same period last year. During this period, FIIs have made a net withdrawal of US $5.5 billion compared to net inflow of US $15.51 billion in the corresponding previous half-year period. Fortunately, FDI inflows more than doubled to $19.29 billion during April-September this year from US $7.25 billion in the same period a year ago.

Meanwhile India’s merchandise trade deficit for the first half of 2008-09 has zoomed 52.87% to US $ 59.77 billion, compared to $39 billion during April-September 2007, due to slowdown in exports growth and higher growth in imports. Soaring crude oil prices and sharp depreciation of rupee helped in exaggerating the import bill. In the wake of sharp fall in capital inflows India’s dependence on capital inflows to finance its trade deficit is a major concern.

The partially convertible Indian rupee continues to be volatile despite slew of measure, and weakened in line with the stock market. Indian rupee depreciated by 4.52% in just 4 trading days to Rs 49.46 per dollar (RBI reference rate) on 14 November from its recent strong position of Rs 47.32 a dollar as on 10 November, due to heightened outflows from the local share market.