Higher portfolio investments and larger deposits by non-residents has helped in improving the country's foreign exchange reserve by USD 1.1 billion during April-December to over USD 290 billion.

The increase has been mainly on account of higher FII inflows, deposits by non-residents and short-term credits, said a recent RBI report.

"During April-December 2012, there was an accretion to foreign exchange reserves by USD 1.1 billion as compared to a draw-down of reserves worth USD 7.1 billion in the corresponding period of preceding year," the report said. The accretion would have been much higher but for the worsening current account deficit (CAD), which is the difference between the inflow and outflow of foreign currency, due to large trade gap.

The CAD touched a record high of 6.7 per cent in December quarter on account of rising gold and oil import and subdued export.

During April-December 2012, CAD stood at USD 71.7 billion accounting for 5.4 per cent of GDP as against USD 56.5 billion (4.1 per cent of GDP) in the same period of 2011.

Net inflows under financial accounts, the report said, has increased to USD 70.7 billion during April-December quarter as compared with USD 58.3 billion during the same period in the preceding year.

PTI