Date:03/04/2006 URL: http://www.thehindubusinessline.com/2006/04/03/stories/2006040301151400.htm

Back Forex reserves decline $6.1 b on valuation loss

Our Bureau

$4.7-billion gain during April-December 2004

Chennai , April 2

There was a decline of $6.1 billion in forex reserves on account of valuation loss in the April-December 2005 period as against a valuation gain of $4.7 billion in the corresponding period of the previous fiscal.

Valuation loss represents the depreciation of major currencies against the dollar. The Reserve Bank of India provided this information through a statement on sources of accretion to forex reserves. The composition of various currencies in the reserves, however, remains a secret.

Higher inflows of foreign investments at $12.9 billion in the April-December 2005 period compared with $7.8 billion in the corresponding previous period helped neutralise partially the impact of the outflow on account of repayment of Indian Millennium Deposits raised by SBI earlier. The capital account balance at $15.3 billion in December 2005 was sharply lower compared with $19.4 billion in the corresponding previous period. The current account deficit for the April-December 2005 period was higher at $13.5 billion compared with $5.9 billion in the corresponding previous period.

Reserves during the April-December 2005 period declined $4.3 billion compared with an increase of $18.2 billion in the corresponding previous period.

Forex reserves were at $137 billion in December 2005 and were the sixth largest holding by a country or central bank in the world.

Reserves have since increased over the past three months by another $11 billion. India's forex reserves are exceeded now only by Russia, South Korea, Taiwan, Japan and China.