Volatile capital inflows rise to 40.5% by Sept

As on March 2005, it stood at 30.8 per cent.

The ratio of volatile capital flows to India's foreign exchange reserves rose to 40.5 per cent by the end of September 2005 from 36.8 per cent at the end of March 2005, according to the Reserve Bank of India (RBI).

The share of short-term debt to foreign exchange reserves increased to 5.8 per cent by the end of September 2005 from 5.3 per cent at the end of 2004-05.

At the end of March 1991, the ratio of volatile flows, comprising portfolio investments and short term debt, was at a high of 146.6 per cent and the ratio of short-term debt was 146.5 per cent, RBI said in its six-monthly report on forex reserves.

The country has seen a net portfolio investment of $5,107 million in April-September 2005, almost 10 times higher than $511 million a year ago.

A turnaround in the FII inflows that occurred in June 2005 continued through September 2005, riding on the back of strong growth expectations and corporate performance.

The return on foreign currency assets and gold, after accounting for depreciation, increased to 3.1 per cent in 2004-05 (July-June) from 2.1 per cent during 2003-04.

This happened, mainly because of the rise in short-term interest rates in the US and lower mark-to-market depreciation on securities, RBI said.

The returns had declined in 2003-04 to 2.1 per cent from 3.1 per cent a year earlier due to lower money market interest rates in major countries and a fall in prices of securities due to rise in longer term yields.