While the country's foreign exchange reserves came down substantially during the financial turmoil in 2008, India's external debt also indicated a sharp rise during this period.

According to finance ministry data, foreign exchange reserves were $310 billion in March 2008 which came down to $252 billion in March 2009. The decrease was 58% over the previous year. During the same period, the country's external debt rose from $225 billion in 2008 to $230 billion in March 2009, a 5% increase over the previous year.

Though foreign exchange reserves showed erosion since May 2008, it has started improving in the last few months. It increased from $251 billion in April to $262 billion in May 2009.

But despite a contraction in the forex reserves, India parked a good amount of dollars in US treasuries. Investments in treasuries increased from $10 billion in May 2008 to $39 billion in May 2009.

Though foreign exchange reserves were on the decline, all through this period India's investment in US treasuries increased. It was $18 billion in October 2008, when US was in the grip of financial meltdown after some of its big financial institutions went bankrupt, and went up to $22 billion in November, $29 billion in December and $39 billion in May 2009.