The country's foreign exchange reserves grew by $31.5 billion in the first nine months of this fiscal, but credit for two out of every three of these dollars go to the rupee appreciation.
The Indian currency's sharp appreciation against dollar — an eyesore for the export sector that has been the main contributor to forex reserves traditionally — contributed $20.3 billion or 64.4 per cent to the total accretion in forex reserves till December 2009 in the current fiscal.
The total foreign exchange reserves increased by $31.5 billion in 2009-10 fiscal, from $252 billion at the end of March 2009 to $283.5 billion in December 2009, according to the Economic Survey presented in Parliament today.
The pre-budget document on the country's economic health added that the actual accretion in forex reserves was, however, only $11.2 billion (35.6 per cent of the total increase of $31.5 billion), which was mainly due to rise in FDI inflows and investments from foreign institutional investors.
The average monthly exchange rate of rupee against $ appreciated by about 10 per cent from Rs 51.23 per $ in March 2009 to Rs 46.63 per $ in December 2009. The exchange rate currently stands near Rs 46.42 a $.
The weakness in $ has been one of the biggest worries in recent past for the export sector, which has been hit the hardest due to recession in developed economies.
In the wake of uncertain global economic scenario, the government did not set an export target for 2009-10. In the beginning of the fiscal itself, the export growth rate started decelerating and the country recorded a fall of 22.3 per cent in exports during April-November 2008-09. After declining for 13 months, the export growth rate turned positive only in November with a growth rate of 18.2 per cent.
However, it was higher net capital inflows — USD 29.6 billion in April-September 2009, against USD 12 billion in year-ago period — that helped grow the country's forex kitty.
All the components, except loans and banking capital, that comprise net capital flows showed improvement during April-September 2009 from the levels seen in the corresponding period of the previous year, the survey noted.
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"... Accretion of $20.3 billion (64.4 per cent) was on account of valuation gain due to weakness of the US dollar against major currencies," the Survey said.
Rupee has been appreciating against the US dollar in the current fiscal, largely due to signs of economic recovery and revival in FII inflows after March 2009.
