India’s forex store dips faster
Recently, India’s foreign exchange reserves have fallen from a peak of $642 billion in September last year to about $ 530 billion.
Reasons for the fall in India’s ‘Foreign Exchange Reserves’:
- Decline in the value of assets in dollars and other currencies by RBI.
- Central bank intervention in the money market to protect the rupee. For example, the RBI has sold a total of $15 billion since the beginning of 2022 to protect the rupee.
Impact: This can lead to an increase in the ‘Current Account Deficit’. The ‘Current Account Deficit’ for the current fiscal ending March 2023 is expected to be above 3% of GDP.
Steps taken by RBI:
RBI had announced measures to liberalize foreign exchange inflows, including giving foreign investors access to a substantial portion of government debt and giving banks wider opportunities to raise more deposits from non-residents.
Source – The Hindu