India's forex reserves remain fourth largest globally: RBI Governor

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• Aug 5, 2022 | Dhupali Das

The Reserve Bank of India (RBI) raised the policy repo rate by 50 basis points to 5.4% on Friday...

Digital Desk: The country's foreign exchange reserves remain the fourth largest in the world, and when complemented by net forward assets, they provide insurance against global spillovers, RBI Governor Shaktikanta Das said on Friday. 

The Reserve Bank of India (RBI) raised the policy repo rate by 50 basis points to 5.4% on Friday.

When compared to Q1FY22's $11.6 billion, Q1FY23's $13.6 billion in net foreign direct investment (FDI) was significant.

"After continuing in exit mode during Q1:2022-23, foreign portfolio investment started to become positive in July 2022. Along with a number of other actions taken in July, the Reserve Bank has also used its accumulated foreign exchange reserves to reduce exchange rate volatility," said Shaktikanta Das.

Foreign exchange reserves were depleted by $1.152 billion in the week ending July 22.

While navigating recent global spillovers, India's external sector has survived the storm. Merchandise exports grew in April-July 2022 while merchandise imports surged to a record high on the back of elevated global commodity prices.  Additionally, data shows that, despite global unrest, demand for service exports, particularly IT services, remained strong in Q1.

The central bank reported that year-over-year improvements were also seen in travel and transportation service exports in Q1 FY23.

In response to currency depreciation, the RBI governor stated that the depreciation of the Indian rupee is due to the strengthening of the US dollar rather than weakness in the Indian economy's macroeconomic fundamentals.

The rupee climbed 46 paise to 78.94 against the US dollar on Friday. The governor of the RBI further stated that they are vigilant and committed to preserving the stability of the Indian rupee.

"Market interventions by the RBI have helped in limiting volatility and maintaining an orderly movement of the rupee," he said.