NEW DELHI: India’s foreign exchange reserve shrunk by another $5.2 billion in the week-ended September 16, as it fell to the lowest since October 2020. According to the data released by RBI, India’s forex reserve stood at $545 billion on September 16, losing nearly $100 billion from the peak level of $642 billion reached in November 2021.
The country’s central bank has been using the forex reserve to support rupee, which has fallen nearly 10% since the beginning of the year. The aggressive intervention by the RBI in the forex market has come at the cost of depleting the forex reserve.
Forex reserves at current level can pay for 9 months of imports. India’s monthly import Bill is nearly $63 billion. Though economists have not yet raised alarm over the situation as they believe, going forward, the RBI may be less aggressive in intervening in the currency market to support rupee, which has shown better resilience than other major currencies in the world.
Also, with crude oil and other commodity prices softening, analysts see these as favourable for forex reserves. The potential FPI inflow into the Indian debt market due to inclusion of Government of India bonds on overseas indices is also likely to replenish the reserve. The forex reserves comprise 90% of foreign currency assets and the rest is gold and special drawing rights (SDRs) with the IMF..