India economic situation is turning down as India’s foreign exchange (Forex) reserves have fallen by about $2 billion per week for seven weeks now. Government officials said they were monitoring the trend and there is no cause for alarm.
In September 2013, then RBI governor Raghuram Rajan had raised funds through FCNR bonds and the scheme fetched $30 billion.
High foreign exchange reserves not only help in international payments but also provide a cushion against exchange rate risks and boost sentiments
Economic affairs secretary Subhash Chandra Garg said funds would be raised through foreign currency non-repatriable (FCNR) deposits or even sovereign bonds if the need arose.
India’s forex reserves crossed the $400 billion mark for the first time last September but have remained volatile since. They declined to $407.81 billion on 22 June from a record high of $426 billion in April, largely on the back of a weakening rupee.
RBI clears the situation. “We are monitoring (the situation) but there is no need to take any action now,” said an RBI official.
The rupee hit a record low last Thursday to cross 69 to a dollar amid rising global oil prices and a trade war between the US and China. Although it recovered a day later amid a recovery in global equity markets, analysts expect it to touch the 70 mark soon.
Developments such as rising oil prices, tightening of global liquidity coupled with a strong dollar and an increase in US interest rates, they say, are expected to continue to put pressure on the rupee.