India's defense of rupee takes large bite from record reserves – Times of India – English Bharat Times

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“Falling FX reserves, persistently-high commodity prices, limited exchange rate pass-through to inflation and elevated INR valuations will likely tilt the balance towards a less interventionist FX policy in coming months,” Madhavi Arora, lead economist at Emkay Global Financial Services Ltd., said in a note.
The drawdown has reduced the import cover these reserves provide to nine months, still above a standard benchmark of three months, but far below the 19 months at the beginning of 2021.
Meanwhile, economists at Citigroup Inc. have forecast India’s current account deficit to reach 3.9% of gross domestic product in the fiscal year through March, versus 1.2% last year. This would be expected to weigh on the rupee and increase pressure on the RBI to intervene to reduce the sharpness of declines.
So far though, central bank governor Shaktikanta Das maintains that the level of reserves and the banking system are both healthy and well placed to handle any external shocks.
The RBI has said it expects the country’s current account deficit to stay within 3% of GDP, which it judges to be sustainable amid softening global fuel, food and fertilizer prices while portfolio flows and exports pick up.

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