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90% of India's forex assets is 'hot money'

Jun 9, 1999

A status paper released on India's external debt revealed that over 92% of India's foreign currency assets, or approximately US$ 25 bn, comprise 'hot money'. 'Hot money' typically refers to that capital which has the potential to evaporate in the event of a crisis. The study has pegged India's short-term debt at US$ 3.63 bn as on December '98. The figure however excludes long term deposits maturing within one year, and includes only NRI deposits and trade credit.

In the case of India, 'hot money' constitutes, almost equally, India's short-term debt, FII investments, and total GDR exposure. When calculated by international norms, India's current short-term debt stands at US$ 8 bn. This, taken along with US$ 8 bn worth of GDR investment (as on 31st December '98) and US$ 8.65 bn worth of FII exposure, comprised the volatile assets of US$ 24.65 bn (92%) of the country's total forex assets of US$ 26.95 bn as on December 31, 1998.

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