India’s record foreign exchange pile may not be adequate

By Administrator_ India

Capital Sands

India’s record of more than $600 billion of foreign exchange reserves might not be good enough, as it falls short on some measures including import cover and liability outflows, according to new research from the central bank.

Foreign exchange reserves surged to $605 billion in the week to June 4 as the RBI mopped up dollars flowing into the nation’s booming stock market as well as via foreign direct investments. The pile is the world’s fifth-biggest after China, Japan, Switzerland, and Russia, and is enough to cover 15 months of imports.

That’s less than the 39 months cover offered by Switzerland’s reserves, 22 by Japan’s, 20 by Russia’s, and 16 months by China’s pile, according to the RBI researchers. Besides, India’s net international investment position — which is the assets over liabilities — is a minus 12.9% of gross domestic product. The minus figure denotes that liabilities owed to foreigners are more than assets.

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