India’s forex reserves drop for 4th week

FE Team
| Published: October 07, 2023 22:22:41

MUMBAI, Oct 07 (Reuters): India’s foreign exchange reserves declined for a fourth straight week to $586.91 billion, the lowest in more than five months, as of Sept. 29, data from the Reserve Bank of India (RBI) showed on Friday.
That was a decrease of $3.8 billion from the previous week. Reserves had fallen by a total of $8.2 billion in the prior three weeks.
The central bank intervenes in the spot and forwards markets to prevent runaway moves in the rupee.
India’s forex reserves are “sizeable” and “very comfortable,” RBI Governor Shaktikanta Das said on Friday, while reiterating that the central bank’s intervention aims to prevent any volatility of the rupee’s exchange rate.
Apart from the central bank’s intervention, changes in foreign currency assets, expressed in dollar terms, include the effects of appreciation or depreciation of other currencies held in the RBI’s reserves.
Foreign exchange reserves include India’s Reserve Tranche position in the International Monetary Fund.
For the week the forex reserves data pertains, the rupee had fallen 0.1 per cent against the dollar and traded in a range of 83.0225 and 83.2450.
The rupee ended at 83.2450 on Friday, down 0.2 per cent for the week.
An AFP report adds: India’s central bank left interest rates unchanged again Friday despite an inflation spike that has sparked official concern over the impact of higher food prices caused by extreme weather.
The benchmark repo rate has stood at 6.50 per cent since February, following a series of hikes by the Reserve Bank of India (RBI) to curb rising prices last year.
Inflation spiked at 7.4 per cent in July before moderating to 6.8 per cent the following month, still well above the RBI benchmark.
The bank had “identified high inflation as a risk to macroeconomic stability and sustainable growth” and “remains resolutely focused on aligning inflation to the four per cent target”, RBI governor Shaktikanta Das said.
Prices for food staples-including wheat, rice and tomatoes-have shot up in recent months, partly because of floods, record-high temperatures and pest attacks in production belts.
Finance Minister Nirmala Sitharaman told parliament in July that the government was taking steps “to contain high prices which are hitting common citizens”.
The government has put curbs on some rice exports to put downward pressure on prices.
Food prices have since eased but “the overall inflation outlook is clouded by uncertainties from the fall in” domestic sowing of key crops and “volatile global food and energy prices,” Das said.
India’s inflation peaked at 7.8 per cent last year in the wake of the global economic fallout from the Russian invasion of Ukraine, which prompted spikes in food and oil costs.
The World Bank this week said India would nonetheless remain one of the world’s fastest-growing economies this year, with strong domestic demand and investment helping it weather inflation.
India overtook Britain last year to become the world’s fifth-largest economy, and recorded 7.8 per cent growth for the June quarter, the most recent figure available.
The world’s most populous country is grappling with increasingly frequent extreme weather events-which scientists attribute to climate change.