2024-07-22 14:19:17
The Economic Survey noted that India’s foreign exchange reserves remain in good shape, with total reserves increasing by $68 billion in 2023-24, the highest increase among major foreign exchange reserve holders.
The rupee was also one of the least volatile among emerging market currencies in FY24.
Going forward, strong foreign capital inflows and a modest trade deficit are expected to keep the rupee in a comfortable range, the survey added.
“As of June 21, 2024, the FER is $653.7 billion, which is sufficient to cover more than 10 months of imports expected in fiscal year 2025 and more than 98% of the total outstanding external debt at the end of March 2024,” the report said.
A comfortable foreign exchange reserve is important to the economy as it acts as a buffer to the domestic economy and insulates it from global spillovers. Foreign exchange reserves provide liquidity and ensure that the country can meet its external obligations.
“The Canadian dollar (current account deficit) has moderated amid strong capital inflows, allowing for an increase in foreign exchange reserves in fiscal 2024,” the survey said. The dollar gained against almost all major currencies in fiscal 2024, while the rupee also faced depreciation pressure, the survey found. However, the rupee was one of the least volatile major currencies.
“Furthermore, FY2024 has the lowest volatility compared to previous years. Estimation of volatility using coefficient of variation (CV) shows that the coefficient of variation for FY2024 is 0.58, which is much lower than the past few years,” it said.
Despite a stronger dollar and rising US Treasury yields, the rupee has remained relatively stable, reflecting the Indian economy’s sound macroeconomic fundamentals, financial stability and strong momentum in improving external conditions.
In terms of financial leverage, India ranks fourth in the world, after China, Japan and Switzerland.
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