India lost $43.2 bn forex reserves in 5 months

New Delhi: India is among the worst affected countries losing foreign exchange (forex) reserves by as much as 3.5 per cent of its gross domestic product due to currency imbalances in the past five months, said a study by an industry lobby released on Wednesday.

The study by the Associated Chambers of Commerce and Industry (Assocham) said among the BRIC nations (Brazil, Russia, India and China), India lost $43.2 billion foreign reserve, which is next only to Russia that lost $175 billion since September last year.

"To put brakes on depreciation and devaluation in domestic currencies, monetary authorities' intervention by flowing dollars to stem the downward pressure on local currencies has led to massive drainage of international reserves," the report said.

Brazil recorded a moderate decline of $6 billion in its reserves position, while China earned $4 billion during the period.

The BRIC nations together hold about 41 per cent of the global forex reserves.

"Foreign exchange reserves have gained ever so greater importance in the present global scenario in providing cushion to protect the economy from speculative capital movements," Assocham Secretary General D S Rawat said.

"The financial crisis-led global currency imbalances are rapidly deteriorating the international reserves position world over," he added.

The rupee breached the psychological Rs 50 level in November 2008 and has been under sustained pressure against the greenback that initiated the Reserve Bank of India (RBI) to sell dollars to resist the fall in domestic currency.

Indian Rupee depreciated 12.58 per cent between September 2008 and January 2009.

From a peak of $315.6 billion in June 2008, India's forex reserves dropped to $248.6 billion in in January 2009. The Assocham attributed this fall to RBI's "strong measures" to stem the global pressures on the Indian currency.

During the April-November 2008 period, RBI sold US dollars to the tune of $31.4 billion as against the net purchase of $55.2 billion in the corresponding period in 2007.