Oil boon for import cover

Published on : January 13, 2016 Topic : Business

India's import cover stood at 9.8 months as of September 2015, the Reserve Bank of India (RBI)'s half-yearly report on foreign exchange reserves showed. The cover was 7.28 months at the end of 2012.

According to Business Standard calculations, import cover at the end of 2015 could improve to 10.81 months, with crude oil prices crashing. Oil constitutes roughly 34 per cent of the country's total imports, which fell 30.26 per cent year-on-year to $29.8 billion in November.

Brent crude oil was at $145.66 a barrel in May 2008 but is now hovering around $30 a barrel. In February 2004, the last time oil prices were at this level, the import cover was as high as 17.7 months. India's imports were lower then, as were foreign exchange reserves ($109.67 bn).

Thus, it can be assumed there hasn't been much improvement in import cover, and RBI must keep accumulating its reserves in case oil prices start normalising.

Source: Business Standard
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