India Forex Reserves: In the midst of global political turmoil, the emerging economies of the world are facing the challenge of depleting foreign exchange reserves these days. Same is the case with India. There is a continuous decline in the Indian currency rupee, due to which there has been a big dent in the dollar treasury of RBI.
decreased forex reserves
According to RBI, the foreign exchange reserves have come down to $528.37 billion as on October 14, 2022. Whereas on 3 September 2021 last year, the foreign exchange reserves were $ 642.453 billion. India’s foreign exchange reserves have decreased by $ 114.08 billion in about a year. And seeing the way the rupee continues to fall, it seems that RBI may have to sell more dollars from its treasury, due to which there may be further reduction in foreign exchange reserves.
Import capability for up to 9 months!
According to the foreign exchange reserves that India has, India has the ability to import for the first 9 months. Due to the weakness in the rupee and the strengthening of the dollar, the state-owned oil companies have to buy more dollars to ensure the import of crude oil because the purchase of crude oil is possible only in dollars. Apart from natural gas, India also imports edible oil and gold, which requires dollars. The weakness in the rupee has increased due to the increase in the demand for the dollar, then the dollar is getting stronger. On the one hand, crude oil is expensive, on the other hand, due to the strength of the dollar, India has to spend more dollars to import crude oil.
Weakness in rupee is worrying!
On one hand, the fall in foreign exchange reserves is working to increase the concern of the government and RBI. So the weakness in rupee is having a bad effect on the economy. The rupee has depreciated 11 per cent in one year. Arun Kumar, Professor of Economics at Jawaharlal Nehru University, believes that the more worrying situation than the depletion of foreign exchange reserves is the continuous fall in the rupee against the dollar. He said that the currency is getting weaker. RBI is selling dollars so that the currency does not fall rapidly. Therefore, the strength of the currency matters more than how much foreign exchange is there. He said, ‘The currency weakens, it will increase inflation, according to me, the strength of the currency should be looked at and not the foreign exchange reserves.’
Enough forex reserves!
Fitch Ratings recently said that India has sufficient reserves of foreign exchange and the current account deficit may also remain in the range. According to Fitch, India has enough foreign exchange reserves to deal with the strictness of US monetary policy and high commodity prices.
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