The country's foreign exchange reserves are at a comfortable level and the economy will not be directly impacted, the Finance Ministry told Lok Sabha today.
"Since the foreign exchange reserve position continues to be at comfortable level, there is no direct impact on the economy," Minister of State for Finance P K Bansal said in a written reply to a query in the Parliament.
The government's assurance comes at a time when the reserve position has actually taken a significant hit falling about 15 per cent in a little more than five months.
The foreign exchange reserves comprising foreign currency assets (FCA), gold, special drawing rights and reserve tranche position with International Monetary Fund (IMF), declined from $295.31 billion at the end of August 2008 to $251.53 billion on February 6, 2009, the minister said.
Explaining the cause of reduction in foreign exchange reserves, the Bansal said, "Intervention by the Reserve Bank of India (RBI) in the foreign exchange market to smoothen exchange rate volatility and valuation changes due to inter se movement of US dollar against other currencies were major factors responsible for decline in foreign exchange reserves."
