MUMBAI: Two-third of the decline in India’s forex reserve during the current financial year is due to valuation changes arising from an appreciating US dollar and higher US bond yields, the Reserve Bank of India Governor Shaktikanta Das said in a statement today while unveiling the RBI’s bimonthly monetary policy.
Das said that India’s foreign exchange reserve stood $ 537.5 billion as on 23 September 2022, down from $545 billion a week ago.
However, Das said that the country’s forex reserve was favourably placed compared with most peer economies.
“There was an accretion of US$ 4.6 billion to the foreign exchange reserves on balance of payments (BOP) basis during Q1:2022-23,” he said in his statement.
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The Governor reiterated that the forex reserve is adequate. At $537.5 billion, India’s forex reserve covers just over 8 months of imports.
The forex reserves comprise 90% of foreign currency assets and the rest is gold and special drawing rights (SDRs) with the IMF.
According to experts, the drop in reserves recently was largely due to the plunge in the valuation of major reserve currencies -- Euro, Pound sterling and Swiss Franc etc -- against the US dollar.
On the issue of RBI’s intervention in the exchange market to support the local currency, Das said that the rupee is a freely floating currency and its exchange rate is market-determined. He also reiterated that the RBI does not have any fixed exchange rate in mind.
“It (RBI) intervenes in the market to curb excessive volatility and anchor expectations,” he said
According to the RBI Governor, during the current financial year (up to September 28), the US dollar has appreciated by 14.5% against a basket of major currencies. “This has caused turmoil in currency markets globally. The movement of the Indian rupee has, however, been orderly compared to most other countries. It has depreciated by 7.4% against the US dollar during the same period – faring much better than several reserve currencies as well as many of its EME and Asian peers,” Das said.