India forex reserves adequate to cushion against external shocks, central bank report says

MUMBAI: India’s foreign exchange reserves are adequate to cushion against external shocks, the Reserve Bank of India said in its monthly report, adding that proactive measures will be needed to limit spillovers from ongoing global volatility.

The Indian rupee has fallen close to 4% since the start of the year, dropping to a record low of 93.98 against the U.S. dollar on Monday. The central bank has sold dollars heavily from its forex reserves to limit the depreciation.

Foreign exchange reserves fell to a two-month low of $709.76 billion as of March 13, the latest data shows.

India’s foreign exchange reserves provide cover for 11.2 months of goods imports and around 95% of the country’s external debt outstanding, the RBI said in its report.

India’s forex reserves fall most in over a year on central bank’s rupee defence

“Given India’s external dependence on crude oil, the evolving situation requires close monitoring and proactive measures to limit adverse spillovers,” the RBI said, adding that the economy’s capacity to absorb external shocks has strengthened over time.

It added that the government’s decision to create an economic stabilisation fund will create buffers to respond to global headwinds.

The 573-billion-rupee ($6.20 billion) fund proposed by the government is intended to respond to unanticipated supply chain disruptions and unexpected shocks to the Indian economy, Indian Finance Minister Nirmala Sitharaman said earlier this month.