The country’s foreign exchange reserves fell sharply in the week to January 28, 2022, due to the revaluation of foreign exchange assets.
According to the latest data from the Reserve Bank of India (RBI), total reserves fell by $4.5 billion this week, mainly due to a drop of $3.5 billion in foreign currency assets. Gold reserves fell by 844 million in a week. The Reserve Bank of India held 743.84 metric tons of gold at the end of September 2021. The Bank of England and the Bank for International Settlements (BIS) held 451.54 tonnes of gold overseas and 292.3 tonnes domestically.
It was the biggest drop since foreign reserves fell by $6.2 billion in the week ended Feb. 5, 2021.
Total reserves stood at $629.8 billion as of the reporting weekend. For the week ended September 3, 2021, foreign exchange reserves reached a level of $642.45 billion, down nearly $12 billion from an all-time high.
While both the US dollar and the euro are intervention currencies and foreign currency assets (FCAs) are maintained in the major currencies, foreign exchange reserves are denominated and expressed in US dollars. Changes in FCA are mainly due to changes in foreign exchange buying and selling by the Reserve Bank of India, revenue from foreign exchange reserves deployment, external aid revenue from the central government, and revaluation of assets.
According to the Reserve Bank of India, foreign exchange reserves rose steadily between March and September last year. However, there has been a decline since then.
With crude prices above $90 a barrel, the rupee is under pressure as higher oil prices will mean bigger import bills. The Reserve Bank of India intervenes in currency markets to reduce volatility.
India imports more than 80% of its crude oil needs. Economists estimate that a 10% increase in oil prices would increase the current account deficit by $15 billion.
India’s crude oil imports rose 119.2% year-on-year to $118.3 billion in April-December 2021, up from $54 billion in the same period in FY21. At this rate, India’s oil import bill is expected to be around $158 billion in FY22, just one notch below the all-time high of $165 billion in FY2014.
Complete News Source : Business Standard
