India's foreign exchange reserves can best be used to invest in certain key infrastructure areas like road and power.
The Reserve Bank of India is not in favour of limiting the build-up of foreign exchange reserves, now at over $93 billion, as the country would require them for higher economic growth, Usha Thorat, executive director at the central bank, said.
India's rupee is likely to remain under pressure due to high prices of crude oil and other commodities, and may stabilise at around 79-80 against the US dollar in the near term, say experts amid limited headroom available with the Reserve Bank to check the weakening of the domestic currency. The currency has slumped over 5 per cent this year after Russia's invasion of Ukraine sent international crude oil prices soaring to a decade high. On Monday, rupee ended at a fresh all-time low of 78.34 (provisional) against the US dollar.
"RBI has been following a good policy. These are the ways of correcting international imbalances," Department of Economic Affairs Secretary R Gopalan said on the sidelines of a seminar organised by ICRIER in New Delhi.
The government on Friday announced that no tax will be charged on overseas spending of up to Rs 7 lakh in a year using debit or credit as it looked to douse backlash from its earlier decision of levying TCS on all spending. The government had earlier this week brought overseas credit card spending under Liberalised Remittance Scheme (LRS). This meant that any spending using credit cards overseas would attract a 20 per cent tax from July 1.
Benchmark interest rate hiked by 50 basis points to 3-year high at 5.90 per cent. Economic growth projection for FY23 cut to 7% from 7.2% estimated in August. GDP expected to grow at 6.3% in September quarter, 4.6% each in December and March quarters.
The total reserves had gone up by $982 million in the previous reporting week.
Foreign currency assets, during the week, jumped by $924 million to $253.732 billion against $252.808 billion in the previous week, RBI said in its weekly report. FCAs, expressed in dollar terms, include the effect of appreciation or depreciation of non-US currencies (such as Euro, Sterling, Yen) held in reserves, RBI said.
Unhedged exposure of the corporate poses a risk and overall percentage of hedging remains low.
The rupee fell by 49 paise to close at 81.89 (provisional) against the US dollar on Monday as heavy selling pressure in the domestic equities and a spike in crude oil prices weighed on the local unit.
India's economic image is not affected due to Adani Group's recent decision to pull out Rs 20,000 crore FPO (follow-on public offers) amid allegations of financial wrongdoings, Finance Minister Nirmala Sitharaman said on Saturday.
Financial shares were the top losers.
The country's foreign exchange reserves surged to $576.98 billion as on March 31, 2021 from $544.69 billion at September-end last year, an RBI report said. Foreign currency assets (FCA), a major component of the overall reserves, increased to $536.693 billion as at March-end 2021 from $502.162 billion, the report noted. On balance of payments basis (excluding valuation changes), foreign exchange reserves increased by $83.9 billion during April-December 2020 as compared with $40.7 billion in the year-ago period, it said.
The country's foreign exchange reserves increased by $8.895 billion to reach a record high of $642.453 billion in the week ended September 3, the Reserve Bank of India (RBI) data showed. In the previous week ended August 27, the reserves had surged $16.663 billion to $633.558 billion, mainly due to a rise in special drawing rights (SDR) holdings. International Monetary Fund (IMF) had made an allocation of SDR 12.57 billion to India. For the week ended September 3, the increase was on account of a rise in foreign currency assets (FCAs), a major component of the overall reserves, RBI's weekly data released on Friday showed.
Sliding for the fifth straight session, the rupee fell 3 paise to close at a fresh lifetime low of 79.06 against the US dollar on Thursday amid a strong greenback overseas and unrelenting foreign fund outflows. At the interbank forex market, the local unit opened at 78.92 against the greenback and witnessed an intra-day high of 78.90 and a low of 79.07. It finally settled at 79.06, down 3 paise over its previous close of 79.03.
Shares of most of the Adani group firms ended lower on Monday, with the group companies' combined mcap witnessing a sharp fall of Rs 9.5 lakh crore after US-based short-seller Hindenburg Research's adverse report.
The country's foreign exchange reserves increased by $1.701 billion to $584.107 billion in the week ended April 23, 2021, RBI data showed. In the previous week ended April 16, 2021, the reserves had risen by $1.193 billion to $582.406 billion. The reserves had touched a lifetime high of $590.185 billion in the week ended January 29, 2021.
The ongoing conflict between Ukraine and Russia is unlikely to have any major impact on the Indian rupee and the forex volatility in the country (USD/INR) has been much less now as compared to the global financial crisis which took place in 2008, SBI said in its Ecowrap research report. The report said that though the conflict between the two CIS nations may drag on for now, it is expected that the USD/INR, the most tracked pair in the local forex market, will trade at an elevated zone. But ideally, the expected average range of the rupee is expected to be in the band Between Rs 76 to Rs 78 to the USD with an appreciated bias.
India's macroeconomic fundamentals are strong to deal with global challenges and the central government is committed to sticking to the fiscal deficit target of 6.4 per cent of the GDP for the current fiscal, official sources said on Monday. The government is taking steps to deal with the spiralling crude oil prices in the international market, the sources said. India meets nearly 85 per cent of its oil demand through imports and a weaker rupee makes imports costlier.
It has been a choppy calendar year 2022 (CY22) for global financial markets amid the spectre of rising inflation that led most central banks, especially the US Federal Reserve (US Fed), to tighten their monetary policy. Most equity indices across the globe have seen a sharp fall from their respective peak levels in this backdrop. FTSE India, for instance, has corrected 16 per cent from its October peak.
India's current account deficit is expected to deteriorate in the current fiscal on account of costlier imports and tepid merchandise exports, according to the Finance Ministry's monthly economic review. The review released on Thursday by the ministry also said that global headwinds would continue to pose a downside risk to growth as crude oil and edibles, which have driven inflation in India, remain major imported components in the consumption basket. For the present, it said, "their global prices have softened, as fears of recession have dampened prices somewhat. This would weaken inflationary pressures in India and rein in inflation."
The rupee appreciated 7 paise to 79.74 against the US dollar in early trade on Thursday as a positive trend in domestic equities supported the local unit. However, a strong American currency overseas and forex outflows restricted the rupee's gain, dealers said. At the interbank foreign exchange, the rupee opened at 79.72 against the American dollar, then went lower to trade at 79.74 against the greenback in early deals, registering a gain of 7 paise over the last close.
The country's foreign exchange reserves increased by $1.739 billion to $582.037 billion in the week ended on March 12, the RBI data showed. In the previous week ended March 5, the reserves had declined by $4.255 billion to $580.299 billion. The reserves had touched a record high of $590.185 billion in the week ended January 29, 2021.
Gold reserves increased $1.54 billion to $32.68 billion in the reporting week.
India's foreign exchange reserves showed a dip for the first time in several weeks after the government repaid $3.04 billion of loans in advance to multilateral agencies in the last week of February.
The country's foreign exchange reserves fell by $249 million to $583.697 billion in the week ended February 12, RBI data showed on Friday. In the previous week, the reserves had declined by $6.24 billion to stand at $583.945 billion. It had touched a record high of $590.185 billion in the week ended January 29, 2021.
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The trade deficit makes up an important part of the current account deficit, which had touched an all-time high of 4.8 per cent in 2012-13.
The Enforcement Directorate (ED) has sought legal assistance from Singapore and Mauritius to take forward its probe in the alleged financial irregularities in the Indian Premier League tournament (IPL) and its former chairman Lalit Modi.
The rupee depreciated 31 paise to an all-time low of 80.15 against the US dollar in early trade on Monday tracking the strength of the American currency and firm crude oil prices. At the interbank foreign exchange, the rupee opened at 80.10 against the dollar, then lost ground to quote at 80.15, registering a fall of 31 paise from the last close. On Friday, the rupee closed at 79.84 against the dollar.
Gold reserves rose by $320 million to $31 billion.
The total foreign exchange reserves had increased by $1.838 billion to $297.28 billion in the previous reporting week.
Reserve Bank Governor Shaktikanta Das on Wednesday said in the wake of appreciating US dollar, the movement of rupee has remained least disruptive as compared to its peers, and the size of foreign exchange reserve is comfortable. On a financial year basis (from April to October 2022), the rupee has appreciated by 3.2 per cent in real terms, even as several major currencies have depreciated, he said while announcing the latest set of bi-monthly monetary policy. "The story of the rupee has been one of India's resilience and stability," the Governor said while pointing out that the appreciation of the US dollar this year, which precipitated large-scale depreciation of all major global currencies including the Indian rupee, has drawn wide attention.
The country's foreign exchange reserves touched a life time high of USD 555.12 billion after it surged by USD 3.615 billion in the week ended October 16, according to RBI data.
A large number of public sector bank employees, as a matter of routine, do not "take" promotions so that they are not transferred out of their hometowns. The eastern region is famous for this, but it is a common practice everywhere, says Shyamal Majumdar.
Gold reserves in the reporting week increased by $707 million to $33.52 billion.
China's forex reserves witnessed an increase of $509.7, a 12.8 per cent rise from 2012, People's Bank of China said.
Finance minister Nirmala Sitharaman on Wednesday exuded confidence that inflation would further decline and the government is on track to meet its budgetary target for deficit and said that there is no fear of stagflation in India. Replying to the debate on first batch of Supplementary Demands for Grants 2022-23 in Lok Sabha, the finance minister said inflation has come down and it is now in the tolerable band of the RBI. Inflation has been declining since April 2022 and it is declining further, she said.
The rupee tumbled 19 paise to close at a fresh lifetime low of 77.93 against the US dollar on Friday as rising crude oil prices and unabated foreign capital outflows soured sentiment. A sell-off in equity markets and stronger greenback overseas also weighed on the domestic unit, forex traders said. At the interbank foreign exchange market, the local currency opened at 77.81 and witnessed an intra-day high of 77.79 and a low of 77.93 against the US dollar.
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