Propelled by foreign investment inflows, India's foreign exchange reserves grew by $26.4 billion for the nine-month period ended December 31, 2003, over a rise of $16.3 billion in the corresponding period of previous fiscal.

The capital account (net) comprising foreign investment, banking capital, short term credit, external commercial borrowings and other items recorded a rise of $17.8 billion (as against $9.7 billion in the corresponding period of FY-03), according to the data released by Reserve Bank of India in Mumbai on Thursday.

The current account balance and valuation change contributed $3.2 billion ($2.9 billion) and $5.4 billion ($3.7 billion), respectively, it said.

The major sources of accretion to forex reserves during April-December 2003 were foreign investment (38.3 per cent), comprising foreign direct investment (9.5 per cent) and  portfolio investment (28.8 per cent).

Foreign investment inflows rose by $10.1 billion ($3.1 billion). However, net inflows under banking capital were up by $5.6 billion ($6.8 billion), while Non-Resident Indian

deposits surged by $3.5 billion ($2.4 billion).

Short-term credit at $2.4 billion ($0.4 billion) and other items in capital account at $3.4 billion ($1.4 billion) were the other sources of accretion.

External commercial borrowings, however, contracted by $3.7 billion ($2 billion), the RBI added.

India's foreign exchange reserves as on March 19 stood at $109.9 billion.

RBI said other items under capital account, which mainly reflect the difference between customs data on imports/exports and banking channel data -- $5 billion, external assistance -- $1.8 billion, rupee debt service -- -$0.3 billion and errors and omissions accounted for 12.9 per cent of the total accretion in reserves.

On valuation changes, it said while the RBI denominates its forex reserves in terms of US dollars, these comprise a basket of major international currencies, particularly the dollar, euro and pound sterling.

Accordingly, when non-US dollar currencies appreciate in terms of the dollar, there is accretion to reserves by way of valuation gains.

The reverse is the case when these currencies depreciate against the dollar. During the period under review, euro, yen and GBP had appreciated substantially against the US dollar, it added.