- Reserve Bank of India's (RBI) monetary policy committee (MPC) also could not stop the rupee's decline with their changed policy rates as a widening current account deficit possess a concern.
- In order to counter the currency loss, RBI has been using forex reserves but even forex reserves have also been dropped to their lowest level in a year.
- Presently India’s foreign exchange reserves have dropped below the $600 billion mark for the first time.
- Even many western economies have imposed sanctions on Russia, which leads to volatility in global markets.
- In fact, FPI also facing losses and creating selling pressure in Indian equities, till now they have sold a massive Rs 1.4 lakh crores worth of stocks in 2022.
- The RBI is now trying to intervene in all foreign exchange markets so that they can protect the currency value.
- How it may impact on economy
- Due to the fall of the rupee, certain things will get expensive which directly impacts on spending decisions of households.
- The import cost of goods and services will also get increased.
- This will also lead to an increase in oil prices since India imports a major chunk of its oil needs.
- Apart from that many imported items like luxury cars, car components, mobile phones and appliances may also become expensive.
- It also impacts on tourism sector which contributes a major part to economic growth due to the fall of the rupee. Now tourist people will have to spend more money when compared to their previous trips.
- Static Part:
- Foreign Exchange Reserves
- Foreign exchange reserves are such assets held by a central bank as reserves in foreign currencies, which can include bonds, treasury bills, and other government securities.
- This also includes Foreign Currency Assets, gold reserves, special drawing rights, and reserve position with the International Monetary Fund.
