Thursday, March 27, 2008

India expects to add $100 bn to forex reserve

New Delhi, January 30: At a time when managing capital flows is becoming a challenge for the authorities, the Government today said it expects to add USD 100 billion to the forex reserves in the current financial year.

"We added USD 47 billion last fiscal. In 2007-08, we expect to add USD 100 billion," Finance Minister P Chidambaram said here at a lecture on 'Law - an Instrument for Economic Growth.'

Overall, India's forex reserves stands at USD 284.8 billion for the week ended January 19.

In this context, Chidambaram said the government's response to today's situation would be different from 1991, when India's forex reserves dipped below a billion dollars.

"A few years ago, we were bemoaning our forex position.

I remember (the) day in 1991... (when) the forex reserves had dipped below a billion dollars. Today, our problem is not that we do not have foreign exchange but what to do with that foreign exchange," he said.

Yesterday, Chidambaram had said he would discuss with RBI Governor Y V Reddy shortly, measures to manage the flow of capital.

While agreeing that RBI's status quo on interest rates and US Federal Reserve's move to cut interest rates would increase the gap between the rates in the two countries, he had said there was no certainty that this would increase capital flows.

Capital can also flow out due to payment obligations abroad, he had said.

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