Home Business India’s total foreign exchange reserves to shrink further this year: Deutsche Bank

India’s total foreign exchange reserves to shrink further this year: Deutsche Bank


India’s total foreign exchange reserves will shrink further this year due to growth and central bank interventions to support the rupee, said on Wednesday.

The country’s trade deficit could widen to $300 billion in fiscal year 2022-23, pushing to about $140 billion, or 3.9% of GDP, the bank estimated in a research note.

“When indeed widen to $140 billion, the overall balance of payments (BOP) deficit could be as high as $80 billion in FY23 as we project a capital account surplus of around $60 billion,” said Kaushik Das, Chief Economist for India and South Asia. , .

Taking into account the reduction in reserves due to changes in valuation, the current budget deficit could be $100 billion to $105 billion, Das said.

India’s spot foreign exchange reserves fell to $561 billion by the end of August from $607 at the end of March, while net forward borrowings likely fell to $17 billion from $66 billion, a $49 billion reduction, Das estimated .

Total foreign exchange reserves, including spot rupee and forwards, stood at $578 billion at the end of August and are likely to fall below $550 by the end of this fiscal year, Das said.

He singled out the performance of Earlier this week, Governor Shaktikanta Das said the central bank would seek to anchor expectations around the rupee’s depreciation and intervene to prevent an overshoot.

“As active foreign exchange interventions by the RBI are expected to continue – to smooth volatility and prevent excessive rupee depreciation – foreign reserves are likely to decline further from current levels,” said.

(Reporting by Nimesh Vora; Editing by Saumyadeb Chakraborty)

(Only the headline and image for this report may have been edited by Business Standard staff; the rest of the content is generated automatically from the syndicated feed.)

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