India comfortably placed to deal with any effect of spillover, says RBI chief Das

Reserve Bank Governor Shaktikanta Das on Monday said with the country's foreign exchange reserves at Rs 5.15 lakh crore ($677 billion), it is comfortably placed to deal with any spillover effects and for financing the current account deficit.

Over the past three years, the country's foreign exchange reserves have surged by around Rs 2.52 lakh crore ($270 billion).

He said as per the latest data, the foreign exchange reserves are $622 billion. Other than that, a lot of forex, amounting to $ 55 billion, are being held in our forward assets, which will mature from time to time every month.

"Our reserves are $677 billion (as of today). India is comfortably placed to deal with any effect of spillover or any challenge with regard to financing current account deficit,” Das said while addressing at the CII National Council meeting.

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Reserves render a lot of stability and confidence in any economy, Das said. “Today, I am able to say with great confidence that we will be able to deal with any spillover effectively because of our $677 billion (forex reserves). So, that represents the strength of the economy and the stability of the economy and the exchange rate,” he said.

To a suggestion of using a small portion of the reserves to finance requirements of the economy, the governor said it was not advisable. "Touching the reserves for financing various requirements of the economy is not at all advisable. They (using reserves) are not in the medium-term, forget long-term, interest of any government, not just for India. According to the RBI's assessment, I think, India should not do it and therefore we are not in favour of it," he said.

Speaking on the impact of recent rate actions by major central banks, the governor said there could be some spillover effects but RBI is confident of maintaining stability of the Indian currency. "I can say with reasonable confidence that we will be able to maintain the stability of the Indian rupee,” he said, adding that the RBI's standard policy is to intervene in the foreign exchange market to prevent excessive volatility.

The governor said that the rupee has depreciated by just 0.4 per cent against the US dollar between April 1, 2021 and March 17, 2022.

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He said the country's foreign exchange reserves are distributed in various foreign currencies and not just concentrated in just one currency. “We have gold reserves which are also dispersed, partly India and partly outside. So it is quite diversified,” he said.

Das further said the Indian economy is better placed and on the external front also the country is doing well. “But, we are living in an uncertain world and there is no reason for complacency. We have to be watchful and we are monitoring very closely,” he said.

The RBI is also monitoring the crude and commodity prices and the volatility very closely.

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