India's import cover at a robust 12 months

Ratio of volatile capital flows to reserves declined from 87.1% in March 2016 to 85.8% in Sept 2016

India’s import cover improved substantially at the end of September last year, thanks to the build-up of reserves by the Reserve Bank of India (RBI).

At the end of September, the import cover increased to 12 months from 10.9 months at end-March 2016, RBI’s half-yearly report on management of foreign exchange reserves showed.

Back in 2012, the country’ import cover had dropped to about seven months. About eight months of import cover is considered healthy.

The report released by RBI showed ratio of short-term debt to foreign exchange reserves, which was 23.1 per cent at end-March 2016, declined to 21.8 per cent at end-September 2016. The ratio of volatile capital flows (defined to include cumulative portfolio inflows and outstanding short-term debt) to reserves declined from 87.1 per cent at end-March 2016 to 85.8 per cent at end-September 2016. 
 

The central bank holds 557.77 tonnes of gold, of which, 265.49 tonnes are held overseas in safe custody with the Bank of England and the Bank for International Settlements, or BIS. Gold, as share of total reserves, is about 5.75 per cent.