September 3, 2013 / 2:24 PM / 4 years ago

Forex reserves dipped to 7 months import cover at end-March

MUMBAI (Reuters) - India’s foreign currency reserves fell to seven months of import cover at the end of March from 7.2 months at the end of September 2012, the Reserve Bank of India said on Tuesday.

A tourist leaves a currency exchange shop at a shopping arcade in New Delhi August 20, 2013. REUTERS/Anindito Mukherjee

The estimate for import cover assumes an extreme case of no export earnings.

The country’s forex reserves fell to $292.1 billion at end-March from $294.8 billion at the end of September.

The rupee has depreciated over 25 percent in value since May. Because of its deficits, it has fared worse than other emerging market currencies since the U.S. Federal Reserve first indicated it is considering reducing its bond-buying stimulus.

External factors coupled with slowing domestic growth have dragged the rupee to a series of record lows, forcing the central bank to sell dollars from its reserves to avert a deeper slide of the local currency.

The rupee touched a lifetime low of 68.85 to the dollar on August 28, and ended at 67.63/64 on Tuesday.

India’s ratio of short-term debt to forex reserves rose to 33.1 percent at the end of March from 28.7 percent last September, the central bank added in its half-yearly foreign exchange reserves management report.

The higher ratio of short-term debt to forex reserves, which could be due to higher debt as well as the fall in reserves, will further eat into India’s forex supply.

Reporting by Archana Narayanan; editing by Stephen Nisbet

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