"This reduction may be due to the fact that India wants to re-channelise their forex reserves more into non-dollar assets. The recent acquisition of 200 tonnes of gold by India is also strengthening this view. With this less exposure to the US treasury bonds means that, India is least vulnerable to the US dollar depreciation in comparison to its Bric peers, with least exposure to the US treasury bonds as percentage of its forex reserves," Jagannadham Thunuguntla, equity head, SMC Capitals, a Delhi-based merchant bank said

1. Is India shying away from dollar assets?
By Kumar Shankar Roy Nov 20 2009 , Kolkata
Of the Bric (Brazil, Russia, India and China) countries, India has the least exposure
(in terms of percentage) of its total forex reserves into the US treasury bonds as of September.
The data relating to the value of the US treasury bonds held is as per the data released by department of treasury of
the United States on 17th November. As of September, India represents just 12.81 per cent ($35.90 billion) of its
forex reserves ($280.34 billion) into the US treasury bonds. This is significantly lower in comparison to the May 2009
level ($38.80 billion) of similar ratio of 14.79 per cent. The forex reserves then were around $262.31 billion.
"This reduction may be due to the fact that India wants to re-channelise their forex reserves more into non-dollar
assets. The recent acquisition of 200 tonnes of gold by India is also strengthening this view. With this less exposure
to the US treasury bonds means that, India is least vulnerable to the US dollar depreciation in comparison to its Bric
peers, with least exposure to the US treasury bonds as percentage of its forex reserves," Jagannadham
Thunuguntla, equity head, SMC Capitals, a Delhi-based merchant bank said.
Just to put the things in perspective, as of September, the similar ratio of exposure to the US treasury bonds as
percentage of its forex reserves, in the case of Brazil was 64.63 per cent ($144.90 billion of $224.21 billion), Russia is
29.46 per cent (121.80 billion of $413.45 billion) and China is 35.15 per cent ($798.9 billion of $2,272.60 billion),
according to the US government data.
Of late, on the back of severe economic recession of 2008, there are serious concerns in the global economic circles
regarding increasing US deficit; and hence possible downgrading of the US sovereign credit rating by credit rating
agencies. All this has brought the virtual consensus regarding the eventual collapse of the US dollar as the reserve
currency of the world.
This makes the countries such as China the most vulnerable countries to any possible US downgrading as it has
exposure to the US treasury bonds of about US$ 798.9 billion. Also, Brazil is also quite susceptible as it has about
64.63 per cent of its forex reserves in US treasury bonds.
"Hence, any eventual crisis in US economy can leave more severe scars to the economies of China, Japan, Brazil
and Russia than that of India. This, in fact, is forcing China to lobby in the international circles to find an alternative to
dollar as the reserve currency of the world," said Thunuguntla of SMC Capitals.