India’s forex reserves have dipped $392.078 billion from $426.08 billion as on April 2018, reported mydigitalfc.
Ashutosh Khajuria, executive director at Federal Bank, said: “There is a cost to maintenance of reserves. So, what accreted in calendar year (CY) 2017 is being spent in CY 18 and should not be taken as a big risk. It should be seen in the context of what happened in CY 2017 when the rupee appreciated by nearly 7 percent vis-à-vis the dollar. So, if we take October 2016 as the base and compare it to October 2018 the rupee has depreciated by 7-8 percent. The US inflation is at 2 per cent compared to India’s inflation of 5-6 percent. So, following the inflation corrected parity principle, the rupee should depreciate by 2-3 percent against the dollar per year.”
“Unlike in 2013, even as the rupee has weakened by 15 percent calendar year-to-date against the dollar, it remains outside that group of most vulnerable currencies and the country’s forex reserves position is still reasonable based on the reserve adequacy matrix (though reversing fast),” UBS analyst Gautam Chhaochharia said in the report.
Madhavi Arora, economist, forex and rates at Edelweiss Securities, said: “We think amid intensified Indian rupee pressures after the October MPC policy and sharp and consistent foreign outflows seen in October, RBI would have possibly increased spot intervention and we may possibly see further loss in reserves in October month.”