Reflecting the huge inflow of overseas funds and need to stem sharp appreciation in the value of the rupee, the Reserve Bank of India bought about three times more foreign exchange in 2006-07 at $26.82 billion against $8.14 billion in 2005-06. | |
| The RBI intervention was to the extent of purchase of foreign currency worth $2.3 billion in March 2007, the last month of the financial year. However, these purchases were much below than what in bought in February 2007 ($ 11.86 billion) and March 2006 (8.14 billion), according to RBI's monthly bulletin (May 2007). |
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| Meanwhile, the NRI deposits saw a net outflow of $ 138 million in February 2007 against a continuous inflow till January since the beginning of the financial year. The cumulative inflow $3.5 billion in NRI deposits in April 06-February 07 against $2.02 billion for the same period in 2005-06. The dip in NRI deposits is mainly attributed to lowering of interest rates on NRI deposits by the RBI and a ban on giving loans against NRI deposits in excess of RS 20 lakh. The central bank was buyer all though the financial year. It was active in market to mop up dollars in April and May 2006. Later it went in pause for five months (June-October). It turned active again in November 2006 with continuous buying of foreign currency till the end of FY-07. |
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| The exchange rate of the rupee against the greenback, which was Rs 44.61 at end-March 2006 depreciated to Rs 46.95 by July 19, 2006. But, it appreciated thereafter to 43.59 by end-March 2007. Overall, during 2006-07, the rupee appreciated by 2.3 per cent against the US currency. The foreign exchange market has witnessed generally orderly conditions during 2006-07 and the current financial year so far with the exchange rate exhibiting two-way movements, RBI said in its annual policy for 2007-08. |
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| The net capital inflows during April-December 2006 at $27.3 billion comprised both debt and non-debt inflows. While net foreign direct investment (FDI) rose to US $ 5.8 billion from US $ 3.3 billion in April-December 2005, portfolio investment slowed down markedly from US $ 8.2 billion to US $ 5.2 billion over the same period, partly reflecting the impact of the stock market turbulence of May-June 2006. |
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| On the whole, debt flows (net) in the form of external assistance, external commercial borrowings (ECBs), NRI deposits and short-term credit put together increased substantially to US $ 14.5 billion in April-December 2006 from US $ 2.7 billion a year ago. |
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