RBI report shows India’s forex reserves cover stands at 11.2 months of imports with a slight decline – Times of India

NEW DELHI: The Reserve Bank of India on Tuesday announced that India’s foreign exchange reserves can cover imports for 11.2 months based on the balance of payments, which is a slight decline of one month from the 11.3-month cover reported at the end of March 2024.
In the report, central bank offered insights into the country’s external financial situation as of the end of June 2024 along with an update on India’s foreign exchange reserves, import coverage, and International Investment Position.

What is an import report ?

Import cover is the number of month’s worth of imports that can be supported by the current level of foreign exchange reserves, making it a crucial indicator of a country’s capacity to endure external economic shocks.
The report said, “At the end of June 2024, foreign exchange reserves cover of imports (on balance of payments basis) stood at 11.2 months (11.3 months at end-March 2024)”.
As of March 2024, the short-term debt accounted for 19.7 per cent of reserves and soared to 20.3 per cent by the end of June, reflecting a slight uptick in the share of short-term liabilities relative to the country’s reserves.
Moreover, the ratio of volatile capital flows, which includes cumulative portfolio inflows and outstanding short-term debt in relation to reserves, experienced a slight rise from 69.8 per cent at the end of March to 70.1 per cent at the end of June.
The apex bank report also emphasized on changes in India’s International Investment Position (IIP), which is a comprehensive record of the country’s external financial assets and liabilities.
India’s external assets increased by $108.4 billion and external liabilities soared by $97.7 billion between the end of June 2023 and June 2024.
This growth in assets and liabilities also highlights the country’s ongoing international engagements and financial transactions.
These updates throw light on India’s external economic status and offer insights into the strength of its foreign exchange reserves in the context of global financial trends. The RBI‘s data on the IIP, along with metrics such as import cover and the debt-to-reserves ratio, are essential for evaluating India’s economic stability in a fluctuating global landscape.