Mumbai, Jan 31:. India’s current account surplus, which swelled to $ 2.5 billion during April-November this year from a deficit of $ 1.3 billion in the corresponding period of the previous year, was the key factor contributing to a record foreign exchange reserves.
This is the major finding of a study by the Reserve Bank of India (RBI) on accretion to foreign exchange reserves in the country and it contradicts the theory that a crucial factor responsible for the surge in forex reserves is the rise in NRI deposits.
The study concluded that though there has been a debate on issues relating to the cost of reserves, in view of the lower proportion of debt creating flows, the cost of accretion to reserves is not very significant.
While the surplus indicates that exports from India is rising more than imports, RBI said that during the eight-month period, accretion to reserves indicated that the increase has been of the order of $ 12.6 billion compared with $ 4.5 billion in the same period last year.
The turnaround in current account surplus was on account of higher earnings from merchandise exports, software exports and strong private remittances, the central bank study said.
According to the RBI, exports during the period grew to $ 34 billion from $ 29 billion and import to $ 41.5 billion from $ 38.3 billion.
The analysis shows that the current account balance which turned around from a deficit of $ 1.3 billion to a surplus of $ 2.5 billion has contributed about 20 per cent. This was on account of higher earnings from merchandise exports, software exports and strong private remittances.
RBI added that under the capital account, the major contribution stemmed from leads and lags in export receipt ($ 2.8 billion) accounting for 22.2 per cent. Foreign investment at $ 1.9 billion (15.1 per cent), NRI deposits at US$ 2.1 billion (16.7 per cent) and banking capital, excluding NRI deposits at US$ 1.9 billion accounted for 15.1 per cent .
“In view of the appreciation of rupee since June 2002, there is a possibility of exports proceeds which were held abroad were brought in during July-November 2002, resulting in higher delayed export receipts'', it noted.
The delayed export receipts, a resultant of leads and lags in realization of export proceeds, could be attributed to the appreciation of rupee vis-a-vis the dollar in recent period, the study added.