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Date : Mar 31, 2021
Sources of Variation in Foreign Exchange Reserves in India during April-December 2020

Earlier today, the Reserve Bank of India released balance of payments (BoP) data for October-December 2020 on its website (www.rbi.org.in). On the basis of these data, the sources of variation in foreign exchange reserves during April-December 2020 are detailed below.

Sources of Variation in Foreign Exchange Reserves: April-December 2020

During April-December 2020, there was an increase in the foreign exchange reserves, the sources of which are set out in Table 1.

Table 1: Sources of Variation in Foreign Exchange Reserves*
(US$ billion)
Items April-December 2020 April-December 2019
I.   Current Account Balance 32.4 -25.2
II.   Capital Account (net) (a to f) 51.5 65.9
  a. Foreign Investment (i+ii) 69.7 46.2
    (i) Foreign Direct Investment (FDI) 40.8 31.1
    (ii) Portfolio Investment 28.9 15.1
        Of which:    
              Foreign Institutional Investment (FII) 30.5 15.3
              ADR/GDR 0.0 0.0
  b. Banking Capital -16.6 -0.7
        Of which: NRI Deposits 7.9 5.9
  c. Short term credit -1.8 0.0
  d. External Assistance 7.2 3.2
  e. External Commercial Borrowings -6.4 12.6
  f. Other items in capital account -0.5 4.7
III.   Valuation change 24.1 6.3
    Total (I+II+III) @
Increase in reserves (+) / Decrease in reserves (-)
108.0 47.0
*: Based on the old format of BoP which may differ from the new format (BPM6) in the treatment of transfers under the current account and ADRs/ GDRs under portfolio investment.
@: Difference, if any, is due to rounding off.
Note: ‘Other items in capital account’ apart from ‘Errors and Omissions’ include SDR allocation, leads and lags in exports, funds held abroad, advances received pending issue of shares under FDI and capital receipts not included elsewhere and rupee denominated debt.

On a balance of payments basis (i.e., excluding valuation changes), foreign exchange reserves increased by US$ 83.9 billion during April-December 2020 as compared with US$ 40.7 billion during April-December 2019. Foreign exchange reserves in nominal terms (including valuation changes) increased by US$ 108.0 billion during April-December 2020 as compared with US$ 47.0 billion in the corresponding period of 2019-20 (Table 2).

Table 2: Comparative Position of Variation in Reserves
(US$ billion)
Items April-December 2020 April-December 2019
1 Change in Foreign Exchange Reserves
(Including Valuation Effects)
108.0 47.0
2 Valuation Effects
[Gain (+)/Loss (-)]
24.1 6.3
3 Change in Foreign Exchange Reserves on BoP basis
(i.e., Excluding Valuation Effects)
83.9 40.7
Note: Increase in reserves (+)/Decrease in reserves (-).
Difference, if any, is due to rounding off.

The valuation gain, reflecting the depreciation of the US dollar against major currencies and increase in gold prices, amounted to US$ 24.1 billion during April-December 2020 as compared with US$ 6.3 billion during April-December 2019.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2020-2021/1331


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