India’s foreign exchange reserves rose by a record $11.9 billion during
the week ended September 28 to top $248 billion as foreign portfolio
investors poured money into stocks in the second-fastest growing
economy in the world.
Last week’s inflows are reckoned to be one of the highest ever and had
the effect of strengthening the rupee, which has gained over 10%
against the dollar since April this year.
According to data released by the Reserve Bank of India (RBI) in its
weekly statistical supplement (WSS), total foreign exchange reserves
including gold and special drawing rights (SDR) rose $11.9 billion
during the week ended September 28. While the forex assets rose $11,383
million, the value of gold in reserves was up by $486 million. Though
the value of SDR in reserves remained unchanged, the reserves with the
IMF rose by $2 million.
The Reserve Bank has mopped up $48.6 billion since April this year,
releasing rupee funds worth Rs 1,16,382 crore. The central bank has
been up against strong capital inflows since April this year. The
inflows accelerated specially after the US Federal Reserve cut its
benchmark interest rates by 50 basis points recently. This led to the
rupee breaching the psychological Rs 40 barrier against the dollar,
inspite of a mopup of close to $12 billion by the central bank during
the week. The strong inflows have also posed a liquidity management
challenge to the central bank.
The central bank data shows that the Centre has refrained from
resorting to ways and means advances (WMA) to meet its temporary
revenue mismatches, indicating a comfortable revenue position. It has
instead parked surplus funds to the tune of Rs 10,871crore as on
September 28 with the central bank, down Rs 12,960 crore over the
previous fortnight’s levels. The states, however, continued to rely on
the central bank to meet their temporary revenue shortfall. They
borrowed an additional Rs 398 crore from the central bank to take their
outstanding stock of WMA to Rs 893 crore as on September 28.
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