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India’s import cover decreased to 10.8 months as of December 2017-end from 11.3 months as of March 2017-end, according to the Reserve Bank of India’s latest report on the management of foreign exchange reserves .
Import cover of reserves is the traditional trade-based indicator of foreign exchange reserve adequacy.
It tells us how long imports can be sustained in the event of a shock.
According to the IMF, traditionally, the import coverage measure has been based on months of prospective imports, with three months’ coverage typically used as a benchmark.
The ratio of short-term debt to foreign exchange reserves, which was 23.8 per cent at March 2017-end, remained at the same level at December 2017-end.
The ratio of volatile capital flows (includes cumulative portfolio inflows and outstanding short-term debt) to foreign exchange reserves declined from 88.1 per cent at March 2017-end to 86.9 per cent at December 2017-end.
Forex reserves
As per the report, foreign exchange reserves in nominal terms (including valuation effects) increased by $39.1 billion during April-December 2017, against a depletion of $1.3 billion during the same period of the preceding year.
Foreign exchange reserves stood at $400.21 billion as of September 2017-end. By March 2018-end, the reserves rose to $424.55 billion.
The RBI said it holds 560.32 tonnes of gold, of which, 268.01 tonnes are held overseas in safe custody with the Bank of England and the Bank for International Settlements (BIS).
Gold as a share of the total foreign exchange reserves in value terms (US Dollar) stood at about 5.0 per cent as of March 2018-end, against 5.3 per cent as of September 2017-end.
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