India's net foreign liabilities, as a percentage of its nominal gross domestic product, has almost halved over the past six years, from 23.41 per cent in March 1997 to 12.70 per cent in March 2003.

In absolute terms, net foreign liabilities have fallen to $60.1 billion from $ 81.1 billion.

The decline was mainly due to the build-up of foreign exchange assets by the Reserve Bank of India during the period, a central bank release said.

Foreign exchange reserves have gone up from $22.4 billion in March 1997 to $71.9 billion in March 2003.

The RBI on Tuesday also released India's International Investment Position as on March 2003. The InIP gives the stock of external financial liabilities and assets at the end of a specified period.

It represents the value and composition of an economy's claims on the rest of the world as well as its financial liabilities at the end of a specified period, and covers all its sectors.

The loan liabilities of the government sector has fallen around 10.3 per cent to $42.7 billion on March 2003 from $47.6 billion on March 1997.

The report added that the banking sector (excluding the monetary authority) had reported a steep fall in its foreign assets (mainly due to a fall in nostro balances) during 2001-02 and 2002-03 since the appreciation of the Indian rupee against the US dollar. Loans extended by banks in India to non-residents have also fallen by $0.9 billion during 2002-03.

The report added that this might indicate a preference for holding domestic assets instead of foreign assets by the corporate and banking sectors during 2002-03 due to the continuous appreciation of the Indian rupee.

The rise in gross foreign assets of the country during 2002-03 comprised a $1 billion increase in direct investment abroad and $21.4 billion increase in reserve assets.

The gross foreign liabilities of the country also increased during 2002-03. Most of it has been due to an approximate $7 billion increase in the banking sector's liabilities in the form of non-residents repatriable deposits.

The other major components include a $5.4 billion increase in foreign direct investment stocks, a $1.5 billion increase in portfolio investment stocks in equities, and a $0.8 billion increase in short-term trade credit availed by the corporate sector due to availability of cheaper short-term funds overseas.

The corporate sector debt securities liabilities in the form of foreign currency convertible bonds and loan liabilities in the form of external commercial borrowings also declined by around $1 billion and $1.5 billion, respectively, in 2002-03.

The changes in the composition of assets and liabilities of the Indian economy, according to the report, indicate the increasing strength of the economy as reflected in the substantial improvement in its net international investment position.