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Indian foreign exchange reserves at new highs of $42.78 billion

India's foreign exchange reserves rose once again in the week to May 4 to record highs, boosted by foreign portfolio and direct investment flows.

Data released by the Reserve Bank of India, showed reserves rose to $42.782 billion in the week to May 4 from $42.654 billion the previous week.

Analysts said the rise reflected the continuing flows of foreign investment into the country, which the RBI has been absorbing to add to its foreign currency assets.

"This rise is as a result of the strong portfolio inflows and foreign direct investment we have been receiving, and the RBI's policy of augmenting reserves," V Srinivas, dealer at Chase Manhattan Bank, said.

Foreign portfolio investment in Indian stocks and bonds has slowed in recent weeks, totalling just $72.5 million so far in May. But flows this year have been stronger and so far India has received a net $2.19 billion compared with just $1.56 billion in all of 2000.

The Business Standard newspaper quoted government data on Saturday as saying inflows of foreign direct investment into India touched Rs 44.97 billion ($959.2 million) in the first quarter of the year, up from Rs 32.34 billion rupees a year ago.

India attracted just $2.6 billion in direct foreign investment last year and the government this week threw open several sectors ranging from drugs and pharmaceuticals to the sheltered defence equipment industry to foreign investors in a bid to achieve an annual target of $10 billion in FDI inflows.

STABLE RUPEE

The partially convertible rupee has also been one of Asia's most stable currencies this year.

It fell briefly to lifetime lows in April, as a slumping stock market and weak regional currencies took their toll on sentiment, but soon recovered.

At Friday's close at 46.8825/75, it is just half a percent weaker than levels at the start of 2001 compared with the seven per cent fall the previous year.

Srinivas said a noteworthy factor was the RBI's attempt to cut its level of forward liabilities, which could further boost confidence in the currency.

The RBI's latest monthly bulletin showed its net outstanding forward sales at the end of March were down to $1.259 billion from February's $1.438 billion.

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