Forex Reserves Burgeon 36%

The country's foreign exchange reserves burgeoned by a record $16.227 billion over the last year in the aftermath of the 9/11 incident. The reserves, which stood at $45.288 billion as of September 14, 2001, increased 35.83 per cent in a year to $61.515 billion as of August 30, 2002. The reserves comprises foreign currency assets, gold held by the Reserve Bank of India (RBI) and special drawing rights held by the Centre.

On a year-on-year basis, this is biggest single accretion to the reserves and enough to cover around 12 months of imports.

"The accumulation of reserves has not been unique to India and was seen in most Asian countries. In India it is part of a long term trend-- a change in structural pattern of the balance of payment situation in the country-- which is catching greater momentum. The RBI has only mopped up excess money and stopped the rupee from appreciation. It would not have happened if the rupee would have been continuously depreciating," says Sanjeev Sanyal, senior regional economist at Deutsche Bank.

 

P Mukherjee, treasurer at UTI Bank, says the inflows have been even evenly distributed from foreign direct investment, FII and also generous inflows from non-resident Indians (NRIs). "The September 11 crisis has in fact affected India positively as there is a feeling that India is a more stable place for investment," he said.

"There has been a lot of NRI remittances as they have felt that it is better to invest in India. The economy is also not doing great and there are no major imports. There has been a lack of demand and lack of supply. If things do not change there is a potential to appreciate another 1.5 to 2 per cent," according to Ravi Pai, head forex and derivatives, HDFC Bank.

Senior bankers say it makes sense to build a war chest to deal with possible exigencies, particularly in the context of global uncertainties and external shocks, a belligerent neighbour (Pakistan) and rising oil prices. Almost 25 per cent of India's import bill is on account of crude oil. The build-up is being aided by a benign inflation, slack imports and a stable currency.