Volatile capital flows rose in 2010-11, says RBI

The ratio of volatile capital flows to foreign exchange reserves rose to 67.3 per cent in 2010-11, compared with 58 per cent in the previous financial year, Reserve Bank of India (RBI) on Thurday said in a report. Volatile capital includes short-term debt and cumulative portfolio inflows.

The half-yearly report on foreign exchange reserves showed the ratio of short-term debt to the foreign exchange reserves was 18.8 per cent as on March 31 2010. It increased to 21.3 per cent as on March 31 2011. Short-term trade credit rose to $11 billion in 2010-11 from 47.6 billion in 2009-10.

External commercial borrowings shot up to $11.9 billion in 2010-11 from $2.8 billion in 2009-10. However, the import cover declined to 9.6 months at the end of March from 11.1 months as on March 31 2010.

India's foreign exchange reserves grew to $305 billion in 2010-11, compared with $293 billion in the previous year.

RBI said foreign exchange reserves are dominated by the dollar. The valuation gain, reflecting the depreciation of the US dollar against major international currencies, accounted for $12.7 billion in 2010-11, compared with a valuation gain of $13.6 billion in 2009-10.

The central bank held 557.75 tonnes of gold, accounting for about 7.5 per cent of the total foreign exchange reserves in value terms as on March 31.