India's net int'l liabilities soar to $10.2 bn

MUMBAI: India’s international assets have fallen much faster than its liabilities resulting in net international liabilities increasing by $10.2 

billion during the quarter-ended September 2008. 

According to figures released by RBI, India’s total external assets declined by $19.7 billion to $358.2 billion as on end-September 2008. 

Nearly 80% of the country’s external assets comprise RBI’s forex reserves — the war chest set aside by the central bank to defend the rupee. 

The decline in foreign assets was on account of a $25.8 billion decline in forex reserves as the rupee fell. Although another component of external financial assets — direct investment — abroad rose $3.2 billion to $55.9 billion in the same period, it could not make up for forex reserves decline. 

Besides reserves and direct investments abroad, other overseas investments by Indians rose by $2.9 billion over end-June 2008 to $15.4 billion on end-September 2008. 

Meanwhile, total financial liabilities declined by $9.5 billion over the previous quarter and stood at $420.5 billion as on end-September 2008. This decline was mainly due to outflows by foreign portfolio equity investors during July-September 2008 and also on account of the effect of valuation changes. 

The foreign exchange reserves stood at $286.3 billion exceeding the external debt ($222.6 billion) by $63.7 billion as on end-September 2008. The gap between international assets and liabilities widened to $62.2 billion from $52 billion in June 2008. 

The share of reserves in the total external assets, declined 79.9% during July-September 2008. Direct investment and other investments accounted for 15.6% and 4.3% respectively, of the total international assets. 

As on end-September 2008, nearly 47% of the country’s external financial liabilities were in the form of other investments, ie: trade credits, loans, currency and deposits and other liabilities. 

Direct investment and portfolio investment accounted for 28.8% and 24.2% respectively, of total external financial liabilities. 

The share of non-debt liabilities to total external financial liabilities after increasing from 40.9% as on end-June 2006, to 49.7% as on end-December 2007, declined to 46.8% as on end-September 2008.

Source:Economictimes