Forex reserves fall by $10 bn

India's foreign exchange reserves fell $9.94 billion during the week ending October 10, 2008 to $274 billion mainly because the Reserve Bank of India (RBI) continued to sell dollars to check the steep depreciation of the rupee.

The revaluation of the foreign currency assets also contributed to the steepest-ever weekly fall. In the previous week foreign exchange reserves had declined by $7.8 billion, which was also a weekly record. Overall, reserves fell nearly $18 billion in a fortnight.

Since hitting a peak of $316.17 billion during the week ending May 23 this year, reserves have dropped by $42.17 billion.

In rupee terms, India's foreign exchange reserves, however, rose by Rs 2,258 crore during the week ending October 10 to Rs 13,33,424 crore. In the financial year, the increase is to the tune of Rs 95,459 crore.

India's merchandise exports, which were estimated at $250 billion in 2007-08 are, however, well covered.

In recent months, foreign institutional investors (FIIs), which are facing financial pressures at home , have been selling in the Indian markets and repatriating money. In calendar 2008 so far, FIIs have been net sellers of $10.83 billion in the equity market.

FII sales have put pressure on the rupee, which has dropped 22.96 per cent against the dollar since January. This has prompted RBI to intervene heavily in the forex markets.

According to the latest RBI data released today, foreign currency assets in the reserves fell by $9.93 billion during the week. The value of gold and special drawing rights remained unchanged. The reserve position with the International Monetary Fund was $3 million lower at $458 million during the period.