The ratio of volatile capital flows, consisting of cumulative portfolio investments and short-term debt, to Indias foreign exchange reserve moved up to 51.1 per cent at March 2009-end from 45.4 per cent a year ago.

There share in the forex reserves was 46.2 per cent at end of 2006-07. With expansion in the coverage of short-term debt, the ratio further increased to 14.1 per cent at end-March 2007, to 15.2 per cent at end-March 2008 and then to 19.6 per cent at end-March 2009, according to Reserve Bank of India (RBI) data.

Bankers said though the ratio has shot up in FY09, it is hardly a concern as the outstanding level of foreign exchange level is robust. After economic reforms began in 1991, Indias financial integration with global markets has rose increased substantially and foreign institutional investments play crucial role in providing capital to corporate growth.

The ratio of volatile capital flows to the reserves was 146.6 per cent at end-March 1991.

On the deployment (investment) of countrys currency assets, RBI said out of the total of $241.4 billion, $134.8 billion were invested in securities, $101.9 billion deposited with other central banks, BIS and the IMF.

A sum of $4.7 billion was placed in the form of deposits with foreign commercial banks / funds placed with the External Asset Managers (EAMs).

A small portion of the reserves is assigned to the EAMs with the objective of gaining access to and delivering benefit from their expertise and market research, RBI said.

Referring to Indias gold reserves, RBI said it holds about 357 tonnes of gold forming about 3.8 per cent of the total foreign exchange reserves in value terms at end March, 2009. Of these, 65 tonnes are being held abroad since 1991 in deposits/safe custody with the Bank of England and the Bank of International Settlement (BIS).

The import cover of reserves was 16.9 months at end March 2004, which came down to 14.4 months as at end-March 2008 and further to 10.3 months as at end-March 2009.

The reserve adequacy for import cover of reserves had fallen to a low of three weeks of imports at end-December 1990. It moved up to 11.5 months of imports at end-March 2002 and increased further to 14.2 months of imports or about five years of debt servicing at end-March 2003.