Reserve Bank Governor Shaktikanta Das on Wednesday said in the wake of appreciating US dollar, the movement of rupee has remained least disruptive as compared to its peers, and the size of foreign exchange reserve is comfortable. On a financial year basis (from April to October 2022), the Rupee has appreciated by 3.2 per cent in real terms, even as several major currencies have depreciated, he said while announcing the latest set of bi-monthly monetary policy.
“The story of the rupee has been one of India’s resilience and stability,” the Governor said while pointing out that the appreciation of the US dollar this year, which precipitated large-scale depreciation of all major global currencies including the Indian rupee, has drawn wide attention.
Das also stressed it is important to make an objective assessment of the movement of the rupee in the context of global and domestic macroeconomic and financial market developments. “Through this episode of US dollar appreciation, the rupee’s movements have been the least disruptive, relative to peers,” the Governor added.
He further said what would be the terminal interest rate for the US Fed, could be anybody’s guess, but it cannot be the case that their monetary policy will be tightened endlessly. When the tightening is over, Das said the tide will surely turn and capital flows to India will improve leading to easing of external financing conditions.
“In this complex world with both push and pull factors at play, the rupee – which is market-determined – should be allowed to find its level and that is what we have been striving to ensure. We must deal with the current global hurricane with confidence and endurance,” the Governor said.
He also said the size of forex reserves is comfortable and has also increased. It has gone up from USD 524.5 billion on October 21, 2022 to USD 561.2 billion as on December 2, 2022 covering around nine months of projected imports for 2022-23.
Further, India’s external debt ratios are low by international standards. Noting that at a time when slowing global demand is weighing on India’s merchandise exports, Das said the country’s services exports remained robust and remittances are scaling new heights. The net balance under services and remittances remains in large surplus, partly offsetting the trade deficit.
Consequently, even if the current account deficit is higher than 2021-22, it is eminently manageable and within the parameters of viability, the governor said. Net foreign direct investment (FDI) flows have remained robust and rose to $22.7 billion during April-October 2022, from $21.3 billion in the corresponding period last year.
Foreign portfolio flows have resumed in recent months and were positive at $11.8 billion during July to December 5, 2022, led by equity flows.
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