Given India’s dependence on oil imports and US recently over taking China as India’s largest trade partner, one can argue Indian currency has to almost operate in a fixed exchange rate regime with the dollar. With US inflation nearing 9% and measures to reduce money supply via rate hikes and quantitative tightening by the US Fed well-nigh certain a few looming questions present itself to the RBI. The government has decided to focus on capital expenditure with the FM stating it has a multiplier effect of 2.4.1 While it would…
Author: Ram Iyer
Ram Iyer is an alumni of EPGP 2021-22. He is an automotive SME with Latent View Analytics. In his spare time he enjoys long walks with his own good company, music and cars.
$10 Billion Forex Losses: Shock or Strategy The asymmetric nature of the shock to the US and Indian economy is playing to the RBI’s advantage, but some of the risks – particularly if investors decide to flock back to Chinese tech stocks – will truly test the RBI’s resolve, writes Ram Iyer.
The last two weeks have seen a sharp decrease of $10billion in India’s forex reserves. In ordinary circumstances this would have raised alarm bells of investors pulling out dollar deposits in search of better returns from the long anticipated and now confirmed first of a series of 25 basis points rate hikes by Jeremy Powell. Although this may well be true, the picture is incomplete without considering the impact of the Russia-Ukraine war on our coffers. With the reduced reserves the RBI has strengthened the rupee making our oil import…