India's forex reserves down $1.5 billion in a week

India's foreign exchange (forex) reserves fell by $1.5 billion to $252.326 billion for the week ended 27 March, according to data released by the Reserve Bank of India.

For the week ended 20 March, forex reserves with the RBI increased by $5.102 billion to $253.826 billion.

Foreign currency assets expressed in US dollars include the effect of appreciation or depreciation of non-US currencies.

Gold reserves stood unchanged at $9.75 billion. Foreign currency assets amounted to $241.59 billion, lower than the $243.24 billion reported in the previous week.

Gold reserves and SDRs remained unchanged at $9.74 billion and $1 million respectively. The reserve position in the IMF increased by $141 million to $982 million.

The foreign exchange reserves (including the valuation effects) declined by $53.75 billion during April-December 2008 as against an increase of $76.14 billion during April-December 2007.

On a balance of payment (BoP) basis (ie, excluding valuation effects), foreign exchange reserves of the country declined by $20.38 billion during April-December 2008 as against an increase of $67.17 billion during April-December 2007.

Valuation loss, which reflect the depreciation of major currencies against the US dollar, accounted for $33.37 billion, or 62.1 per cent of the total decline in foreign exchange reserves of $53.75 billion, during April-December 2008 as against a valuation gain of $8.96 billion during the corresponding period of the previous year.

Apart from current account deficits, outflows under FIIs were the other major sources contributing to decline in foreign exchange reserves during April-December 2008.

According to Dilip Ratha, lead economist, World Bank, remittance flows to India, are conservatively estimated to have reached $45 billion in 2008 compared with $35 billion a year ago. This makes India the top recipient of remittances in the world.

RBI's BoP data shows that private transfer receipts, comprising mainly remittances from Indians working overseas, increased to $36.9 billion in the April-December 2008 period from $29.3 billion in the corresponding period of the previous year.

While the inflows on account of remittances have been healthy so far, the warning issued earlier this year by the International Monetary Fund managing director, Dominique Strauss-Kahn, has raised the specter of slowdown in economies, where people of different nationalities go to work, leading to possible diminishing of remittances.

The Migration and Remittances Team of the World Bank has said that remittance flows to developing countries will decline by 5 to 8 per cent as the world GDP growth is expected to slump to 0.9 per cent.

By contrast, China's forex reserves at the end of December 2008 topped $1.95 trillion, equal to nearly $1,500 per head for the entire population of China.