Don’t miss the latest developments in business and finance.

Reserve Bank defends forex policy as India attempts to avert global risks

The RBI has used its nearly $700 billion forex pile to prevent wild swings in the rupee, making it one of the least volatile currencies in the world

Reserve Bank of India, RBI
The RBI reiterated the point made by Governor Shaktikanta Das several times that India’s reserves are built after meeting all current and capital financing needs to act as an umbrella for rainy days | Photo: Bloomberg
Bloomberg
2 min read Last Updated : Nov 21 2024 | 1:28 PM IST
By Subhadip Sircar
 
India is trying to keep its currency stable to ensure the economy is insulated from global spillovers and financial stability risks, according to the nation’s central bank. 
 
The level of the rupee is determined by demand and supply in the market, which is reflective of the macro fundamentals of the economy, Reserve Bank of India officials including Deputy Governor Michael Patra wrote in their monthly bulletin Wednesday.
 
The comments try to address criticism that the RBI has artificially kept the exchange rate stable through excessive interventions in the foreign exchange market. The RBI has used its nearly $700 billion forex pile to prevent wild swings in the rupee, making it one of the least volatile currencies in the world. 
 
“Forex market interventions need to be adjusted for the economy’s size to draw a fair conclusion,” RBI officials wrote. The monetary authority’s net interventions to the gross domestic product averaged 1.6% from February to October 2022, against 1.5 per cent during earlier crises, which were of much lower magnitude, they added. 
 
The RBI reiterated the point made by Governor Shaktikanta Das several times that India’s reserves are built after meeting all current and capital financing needs to act as an umbrella for rainy days.

Also Read

 
The central bank’s exchange rate policy has not hurt India’s trade competitiveness and the country’s export emphasis is shifting toward improvements in quality and technology without needing “artificial props such as from an undervalued exchange rate,” they said.
 
The Indian rupee has declined 1.5 per cent this year against the dollar, the least among Asian currencies. 
 
On the currency’s medium-term outlook, the RBI “remains bullish as global turbulence subsides and the innate strength of the macro-fundamentals reasserts itself.”

More From This Section

Topics :Reserve Bank of IndiaShaktikanta DasRBI GovernorRupeeindia forex reserve

First Published: Nov 21 2024 | 1:28 PM IST

Next Story