Lok Sabha Question No. 3065 (UNSTARRED), answered on 2015-08-07
Subject: Foreign Exchange Reserves
Ministry: FINANCE
Asked by: RAM CHARITRA

- (a) the present status of the Foreign Exchange Reserves (FERs) of the country;
- (b) whether FERs of the country have witnessed fluctuations in the recent months, if so, the details thereof  and the reasons therefor;
- (c)  whether  the  incremental  rate  of  foreign  exchange  has  quadrupled  during  the fiscal year 2014-15 as compared to previous years, if so, the details thereof and the reasons therefor; and
- (d) other steps taken in this regard to retain the aforesaid trend?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI JAYANT SINHA)

- (a) India's foreign exchange reserves (FERs) were placed at US$ 304.2 billion at end March 2014, US$ 341.6 billion at end March 2015 and US$ 353.5 billion at end July 2015.
- (b)  Month-wise  data  on  FERs  indicate  by-and-large  a  broad  rising  trend  as  given below.

## Foreign Exchange Reserves (in US$ billion)

| End-Month   |   2014-15 | 2015-16   |
|-------------|-----------|-----------|
| April       |     311.0 | 351.9     |
| May         |     312.2 | 352.5     |
| June        |     316.1 | 356.0     |
| July        |     319.8 | 353.5     |
| August      |     318.4 |           |
| September   |     314.2 |           |
| October     |     315.9 |           |
| November    |     315.6 |           |
| December    |     320.6 |           |
| January     |     328.7 |           |
| February    |     337.7 |           |
| March       |     341.6 |           |

Source: Reserve Bank of India

- (c)  The  change  in  the  stock  of  FERs  is  mainly  the  outcome  of  the  absorption  or injection  by  the  Reserve  Bank  of  India  (RBI)  of  the  excess/  deficiency  of  capital account inflows over the external financing requirement as indicated by the level of current  account  deficit  (CAD)  on  balance  of  payments  (BoP)  basis.  The  valuation gain/loss  in  the  stock  of  foreign  currency  assets  arising  largely  on  account  of  the depreciation or appreciation of the US dollar against major currencies and the rise or fall of the price of gold and other stock of assets in the FERs are the other significant reasons for the change in the levels of FERs. In 2011-12 and 2012-13 there was a rise in the levels of CAD on account of the high global crude oil prices and a rise in gold imports. As the net capital inflows were insufficient to finance the level of the CAD, reserves had to be drawn down on BoP basis in 2011-12. In 2012-13, while

CAD remained high it was financed fully by capital inflows and there was a modest accretion to reserves on BoP basis. In 2013-14, Government took steps to lower the CAD in view of the strong bout of depreciation of the rupee in the initial parts of the year and encourage capital flows which resulted in a sharp decline in the levels of CAD  that  were  more  than  adequately  financed  by  capital  flows  resulting  in  an accretion to reserves of US$ 15.5 billion on BoP basis. In 2014-15, the continued moderation in CAD and copious inflows led to an accretion to reserves on BoP basis of the order of US$ 61.4 billion. However, the stock of FERs increased by US$ 12.2 billion in 2013-14 and US$ 37.4 billion in 2014-15 on account of valuation loss. on an ongoing basis calibrating policies or regulations to support

(d)  The  broad  rising  trend  in  FERs  continues  in  2015-16  so  far  as  well.  The Government and the RBI are closely monitoring the emerging external position and robust macroeconomic outcome.

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