NEW DELHI, 3 September (Kulwant Singh Khairabadi): India has received encouraging news on foreign exchange amid global economic uncertainty and rising crude-oil prices. A large inflow of foreign currency has strengthened the country’s reserves and may help authorities manage pressure on the Indian rupee.
According to the report, special foreign-exchange swap measures introduced by the Reserve Bank of India attracted about US$136.38 billion by 31 August. Foreign Currency Non-Resident Bank, or FCNR(B), deposits accounted for the largest share of the inflow.
Foreign-exchange reserves reach record territory
The inflows have reinforced India’s forex reserves. Reports said the country’s reserves reached a record US$729.33 billion in the week ended 21 August. A strong reserve position is widely regarded as an important source of economic protection.
Support for the rupee as oil becomes costlier
Higher crude prices caused by tension in the Middle East present a challenge for India, one of the world’s largest oil importers. In these conditions, stronger reserves can give the RBI greater capacity to manage excessive volatility in the rupee.
Economists will now watch how oil prices and global financial-market conditions affect the Indian currency and the wider economy in the days ahead.
