Downslide in forex reserves continues

Gold reserves remained static at 2,924 million but the special drawing rights SDRs, however, showed a rise of four million to 12 million. RBI said foreign currency assets expressed in US dollar terms included the effect of appreciation/depreciation of non-US currencies held in its reserves.

Rating agency DCR India has criticised the measure of propping up of the currency by using foreign exchange reserves and said it has depleted the reserves rather than help firm up the rupee. The country8217;s forex reserves dwindled by about two billion dollars in recent months.

Since dollar has gained against currencies of most developed countries during the period, if Rupee remained stable, India8217;s competitiveness in export market would be adversely affected, it said. The demand for dollars has been mainly due to surging imports increasing oil import bill caused by high international oil prices rather than absolute speculation. Moreover, foreign institutional investors have pulled out funds from the Indian

In this situation, therefore, it was questionable if sacrificing a low interest rate regime to achieve stability in rupee-dollar value was worthwhile, the agency said.