November 16, 2003	Sunday	Ramazan 20, 1424

MUMBAI, Nov 15: India’s foreign exchange reserves surged past $93 billion in the week to November 7, as the central bank continued to mop up dollars to dampen demand for the rupee.

Surging foreign fund inflows also boosted reserves but analysts expect the pace of growth in Asia’s sixth-biggest forex reserves holder to ease due to Reserve Bank of India’s (RBI) measures to contain interest rate differentials.

The NRI flows are slowing down as RBI’s move to curb interest rate arbitrage is gradually proving effective, said R.V.S. Sridhar, chief dealer at UTI Bank.

Non Resident Indian (NRIs) shifted to rupee-based assets, shying away from dollar-denominated assets lured by higher yields.

But RBI has lowered the ceiling of the interest rate banks can offer on repatriable non-resident external rupee deposits, discouraging arbitrage driven inflows.

Last week the government tightened its foreign loan policy saying external borrowings above $50 million would be allowed for equipment imports and infrastructure projects. Analysts say the the government’s move is aimed at restricting inflows and moderate the rise of Indian rupee’s rise against the US dollar.

Data released by RBI on Saturday showed that the reserves rose $613 million during the week to $93.211 billion, taking the increase in 2003 to more than $22 billion. The average weekly gains this year so far have been in excess of half a billion dollars.

More than half of current week’s addition was due to overseas buying of local shares, which totalled $343.6 million.

Analysts say the RBI is expected to continue its effort to absorb dollar flows to check the rise of local currency, which has appreciated about six per cent in 2003 and made Indian exports less competitive.

Overseas demand for Indian shares is expected to increase after a brief slowdown ahead of the year end, on optimism that higher economic growth will continue to swell corporate profits.

On Friday, the Indian government raised its GDP forecast for the year to March 2004 to more than seven percent from six per cent.

Asia’s third-biggest economy grew 4.3 per cent last year.—Reuters