New Delhi: With the rupee witnessing a downward spiral for the past several weeks, even crossing the 83 mark against the US dollar, RBI Governor Shaktikanta Das has said that the Indian currency has behaved in an orderly manner and its trajectory shouldn’t be looked at emotionally.
Das, while addressing industry body FICCI’s banking summit in Mumbai, said that capital flows will resume as the US Federal Reserve will not resort to tightening of rates for a long time.
The RBI Governor’s comments on the rupee came just hours before the US Fed was scheduled to meet to review key rates.
Meanwhile, referring to the RBI’s Monetary Policy Committee’s (MPC) scheduled meeting to discuss its reply to the government, for failing to keep inflation within its tolerance limit of less than 4 per cent, Das said that the central bank won’t immediately release details of the deliberations.
The RBI does not have the authority to release these details, he said.
The central bank is mandated to keep inflation within the tolerance limit of 2 per cent to 4 per cent. However, its failure to do so for the past nine months, has warranted a response from the Centre.
Defending the RBI’s handling of price rise, Das said that acting prematurely on inflation would have exerted a heavy cost on the economy and citizens.
Though he agreed that inflation has not been under control, the RBI Governor at the same time added that the central bank prevented a “complete collapse of the economy by keeping rates lower and stayed away from premature tightening”.
Speaking on the Central Bank Digital Currency (CBDC), Das said that RBI wants to iron out all aspects related to it before its launch.
He said that e-rupee launch was a landmark moment in the history of currency in the country and it will transform the way business is done and the way transactions are conducted.
The RBI had launched a trial of the digital rupee.
India’s forex reserves to fall another $15 billion by end-2022
Mumbai: India’s fast-depleting foreign exchange reserves are likely to drop more than was predicted just a month ago by end-2022 as the Reserve Bank of India will continue to shield the rupee from the dollar’s strength, a Reuters poll found.
Even though the RBI has drawn down about $118 billion from its currency reserves from a peak of $642 billion over a year ago, the rupee has fallen nearly 12% during the same period. It touched a lifetime low of 83.29 per dollar on October 20.
India’s forex reserves were forecast to fall to $510 billion from around $525 billion by the end of this year, the Oct. 28-Nov. 1 Reuters poll of 19 economists showed. That was lower than $523 billion in a September poll.
Estimates were in a $520-480 billion range. Reserves of more than $500 billion are generally seen by most economists as adequate for India.
A drop in foreign currency assets, the largest component of India’s foreign exchange reserves, is the main reason for the overall decline this year.
With the U.S. dollar expected to remain strong in the short- to medium-term that depletion trend was unlikely to reverse anytime soon.