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Import cover falls to 10.1 months in June

30th November, 2018

Reserves stood at $393 bn in mid-Nov.

The adequacy of foreign exchange reserves, as measured by import cover, declined to 10.1 months as on June 2018 compared with March when it was 10.9 months, the Reserve Bank of India (RBI) said in its half yearly report on foreign exchange management.

“The ratio of short-term debt (original maturity) to reserves, which was 24.1% at end-March 2018, increased to 24.3% at end-June 2018,” the report said adding the ratio of volatile capital flows to reserves increased from 85.3% at end-March 2018 to 86.2% at end-June 2018.

The reserves, which stood at $424.54 billion as at end-March 2018, fell to $405.74 billion as at end-June. Latest data showed the reserves were at $392.7 billion for the week ended November 16, down by $795 million compared with the previous week.

While the foreign exchange reserves are denominated in U.S. dollar terms, movements in the foreign currency assets occur mainly on account of purchase and sale of foreign exchange by the RBI, income arising out of the deployment of the foreign exchange reserves, among others.

The RBI had to intervene in the currency market to slow the pace of fall in the rupee which had depreciated about 15% during the January-October period before bouncing back in November.

Source: The Hindu