Forex Reserves at $562.9 bn; Fall by $70 bn in 2022

India’s foreign exchange reserves fell by $70.1 billion in 2022, data released by the Reserve Bank of India (RBI) shows. The forex reserves stood at $562.9 billion in the week ended December 30. The decline in the forex reserves is partly due to the RBI intervention in the currency markets to stave off volatility and partly on account of depreciation of other major currencies held by the central bank. The RBI net sold $33.42 billion till September, Union finance minister Nirmala Sitharaman said. The RBI holds major currencies including pound sterling, yen and euro in its reserves, which are expressed in US dollar terms.

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Fall of The Rupee Through-out the Year:

• The rupee depreciated 10.2% against the US dollar in calendar year 2022.
• The rupee breached 80 against the dollar in September and has remained at Rs 81-82 levels since then.
• The rupee is likely to trade with an appreciating bias in the range of 81-83 against the dollar till March.
• In 2023, the Indian currency is expected to remain in the range of 80-83, the forex reserves and forward cover will aid in ensuring that the rupee will remain range bound.

A Reducing Import Cover:

Forex reserves had touched a high $642.5 billion in September of 2021, falling to around $631.5 billion towards the end of February 2022, when the Ukraine-Russia war started. RBI had said that FX reserves of $564.1 billion as on December 9 are equivalent to 9.2 months worth of imports, lower than the projected 15 months of imports at the peak levels.