The Institute of Economic Growth has forecast a depletion in the foreign exchange reserves to $79 billion in August mainly due to over $4 billion dollar payout of Resurgent India Bonds after two months, coupled with a rise in trade deficit and a decline in interest rate differentials.
Stating that these factors could contain the rise in the reserves, IEG said the decline in interest rate differential, sluggishness in the domestic markets and the US-Iraq war has contributed to decline in foreign institutional investments to $77 million in February, 2003 compared to $269 million in January.
"The expected decline in the domestic interest rates, appreciation of rupee vis-à-vis dollar and below the expected corporate results would keep FIIs away from the domestic market for a while," the economic think tank says.
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