HomeBusinessFall in forex reserves in India worrying, inflows slow: Economist

Fall in forex reserves in India worrying, inflows slow: Economist

India’s foreign exchange reserves fell to $553.1 billion in the week ended September 2, the lowest since October 2020 and $8 billion less than the previous week, data from the Reserve Bank of India (RBI) showed on Friday.

India’s foreign exchange reserves fell to $553.1 billion in the week ended September 2, the lowest since October 2020 and $8 billion less than the previous week, data from the Reserve Bank of India (RBI) showed on Friday.

Economists said on Monday that India’s foreign exchange reserves falling to a two-year low is a matter of concern for the economy as the pace of foreign inflows into the country’s markets has eased amid tightening global monetary policy.

India’s foreign exchange reserves fell to $553.1 billion in the week ended September 2, the lowest since October 2020 and $8 billion less than the previous week, data from the Reserve Bank of India (RBI) showed on Friday.

It was the biggest fall in reserves since early July, which analysts blamed on the central bank actively intervening in currency markets to help the rupee hit a record low of 80.12 against the dollar that week. reached.

Anita Rangan, Economist at Equirus, said, “The situation is getting worrisome as the Federal Reserve and other central banks are acting aggressively and inflows into Indian markets in September are not as strong as in August.” Stocks are dwindling.

Foreign investors have bought Indian equities worth about $700 million so far this month, after infusing $6.5 billion in August.

On the debt side, Ms Rangan said attracting inflows would be a challenge as the interest rate differential between developed markets such as India and the United States could widen. The pace of rate hikes in the United States and Europe is expected to be faster than in India, where the gap between targeted inflation and actual inflation is smaller.

Vivek Kumar, an economist at QuantEco Research, pointed out that the fall in reserves was not due to RBI spot intervention.

Foreign exchange mark-to-market and maturity of futures contracts may have contributed to the decline, Mr Kumar said.

RBI has been regularly dipping reserves to protect the rupee from volatility caused by the US Fed’s rate hike and higher commodity prices.

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