Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said the movement of the rupee has been orderly compared to its peers, and that the country’s foreign exchange (forex) reserves are adequate to deal with any external shock.
He said about 67 per cent of the depletion of the reserves this year is due to the change in valuation as the US dollar rose. In the current fiscal, till September 28, the dollar has appreciated by 14.5 per cent against a basket of major currencies.
“The movement of the Indian rupee has, however, been orderly compared to most other countries. It has depreciated by 7.4 per cent against the US dollar during the same period (April 1-September 28) — faring much better than several reserve currencies as well as many of its emerging market economies (EME) and Asian peers,” the RBI Governor said after announcing the monetary policy decision. On Friday, the rupee rose 37 paise to end at 81.36 against the dollar.
Stating that the rupee is a freely-floating currency and its exchange rate is market determined, Das said the overarching focus of the RBI is on maintaining macroeconomic stability and market confidence. The actions of the RBI have helped in engendering investor confidence and this is reflected in the return of capital inflows since July, he said. “Over the medium term, the primacy of price stability embedded in our flexible inflation targeting (FIT) framework provides the anchor for exchange rate stability,” Das noted.
He added that the RBI’s interventions in the forex market are based on continuous assessment of the prevailing and evolving situation, and the aspect of adequacy of forex reserves is always kept in mind. “Therefore, in our assessment, taking into account the current levels of reserves and various vulnerabilities vis-à-vis the external sector, I think we are comfortably placed and our buffers are very strong,” Das said at the post-policy conference.
The forex reserves saw their steepest fall in nearly 6 months, by $8.13 billion, for the week ended September 23. This has primarily been to control the rupee volatility.
Since January till date, the forex reserves have fallen by $95.218 billion. During the week ended September 23, they fell by $8.134 billion to $537.518 billion. “About 67 per cent of the decline in reserves during the current financial year is due to valuation changes arising from an appreciating US dollar and higher US bond yields,” Das said.
Even on balance of payment (BoP) basis, there was an accretion of $4.6 billion to the reserves in the first quarter of FY23.
Reserve Bank Deputy Governor Michael Patra said the current account deficit (CAD) is expected to be under 3 per cent this fiscal.
“CAD will widen in the first half but narrow in the second half and we expect to be under 3 per cent,” he told reporters.