International BusinessRatio of volatile capital to forex reserves moves up in FY09
The ratio of volatile capital flows, consisting of cumulative portfolio investments and short-term debt, to India’s foreign exchange reserve moved up to 51.1 per cent at March 2009-end from 45.4 per cent a year ago.
There share in the forex reserves was 46.2 per cent at end of 2006-07. With expansion in the coverage of short-term debt, the ratio further increased to 14.1 per cent at end-March 2007, to 15.2 per cent at end-March 2008 and then to 19.6 per cent at end-March 2009, according to Reserve Bank of India (RBI) data.
Referring to India’s gold reserves, RBI said it holds about 357 tonnes of gold forming about 3.8 per cent of the total foreign exchange reserves in value terms at end March, 2009. Of these, 65 tonnes are being held abroad since 1991 in deposits/safe custody with the Bank of England and the Bank of International Settlement (BIS).
The import cover of reserves was 16.9 months at end March 2004, which came down to 14.4 months as at end-March 2008 and further to 10.3 months as at end-March 2009.
The reserve adequacy for import cover of reserves had fallen to a low of three weeks of imports at end-December 1990. It moved up to 11.5 months of imports at end-March 2002 and increased further to 14.2 months of imports or about five years of debt servicing at end-March 2003.