MUMBAI: The country’s foreign exchange reserves, which stood at close to $700 billion in the latest reporting week, can cover 95% of external debt outstanding at the end of March 2025, and also take care of over 11 months of goods imports cover, according to the Reserve Bank’s July bulletin.
"The external sector remained resilient, backed by ample foreign exchange reserves and a moderate external debt-to-GDP ratio. At the current level, the reserves cover 95% of external debt outstanding at the end of March 2025, and can also provide over 11 months of goods imports cover," said the RBI bulletin released on Wednesday.
Forex reserves stood at $699.74 billion for the week to July 18, down by $3.04 billion, according to the RBI data, which attributed the fall to the reduction in foreign currency assets, while gold reserves saw a slight increase.
The foreign exchange reserves had stood at $702.78 billion as of June 27, up by $4.8 billion from the previous week and had peaked at $704.885 billion for the week to September 27, 2024.
Meanwhile, the RBI made net forex purchases of $1.76 billion in the spot forex market in May, according to the bulletin. This comes after it remained the net seller of $1.66 billion in April. According to the bulletin, the RBI gross purchased $9.12 billion and sold $7.36 billion in the spot market in May.
This was because the rupee was under pressure depreciating by 1% in June against the dollar.
The RBI's net outstanding forward dollar sale stood at $65.2 billion in April, compared to a net sale of $72.6 billion in March, the data showed.
Meanwhile, in another article called the state of the economy in the bulletin, which is not the official position of the RBI, the authors said the domestic economy held up amidst tariff policy uncertainties as the global macroeconomic environment remained fluid in June and July so far amidst geopolitical tensions and tariff policy uncertainties.
“Despite global uncertainties, our economy remains largely resilient, supported by strong macroeconomic fundamentals,” the article said, adding easing inflation, front-loaded government expenditure and targeted fiscal measures and a normal monsoons would support aggregate demand in the coming months.
It also noted that headline retail inflation remained below 4% for the fifth consecutive month in June driven by deflation in food prices.
Also, system liquidity remained in surplus, topping over Rs 4 trillion early July, to facilitate a faster transmission of policy rate cuts to the credit markets. The external sector remained resilient, backed by ample foreign exchange reserves and a moderate external debt-to-GDP ratio, the article said.
On the tariff tantrums that the Trump administration has been throwing since March, the authors warned that if implemented as threatened, it could take the duties to the high levels seen only in the 1930s.
Warning that the average trade tariffs of the US are set to touch levels unseen since the 1930s, the bulletin called for the need to build resilient trade partnerships, accelerate infrastructure investments, and pursue structural reforms to maintain growth momentum amid rising global protectionism.
Stating that the ongoing trade policy negotiations, with new US import tariffs set to kick in from August 1, pose considerable headwinds to global growth prospects, the article said, "The evolving pattern of global trade flows and supply chains are far from settled and that average tariff rates can touch levels not seen since the 1930s. Also, risk of imposition of new high tariffs looms large for additional sectors. These uncertainties pose considerable headwinds to global economic prospects."