With India's forex reserve falling to a three-month low, former Rajya Sabha MP and BJP leader Subramanian Swamy today claimed that an economic crisis is inevitable but Prime Minister Narendra Modi's colleagues are too frightened to tell him. He said that the Modi government is clueless about the looming crisis. "Mark my words: Modi’s political colleagues are too frightened to tell him like it is in the economy. Modi himself is ignorant of economics, so the crisis is inevitable due to Govt being clueless," said Swamy in a tweet.
The country's forex reserves fell by USD 2.39 billion to a three-month low of USD 560.003 billion for the week to March 10, the Reserve Bank said in its latest weekly data release. In the week to March 3, the reserves rose by USD 1.46 billion and stood at USD 562.40 billion.
On an annualised basis, the RBI said, the reserves are down by USD 47.31 billion during the week under review while on a fiscal year basis, the same plunged by USD 62.23 billion.
With this erosion, the forex kitty is at the lowest since early-December, according to the weekly statistical supplement released by the RBI on Friday.
The loss in the reserves is due to the revaluation of the foreign currency assets, which are the largest component of the forex kitty, to the tune of USD 2.2 billion to USD 494.86 billion for the week to March 10.
On a year-on-year basis, the value of foreign currency assets fell by USD 45.86 billion and from a fiscal year perspective, they lost USD 59.49 billion.
Expressed in dollar terms, foreign currency assets include the effect of appreciation or depreciation of the non-US units like the euro, the pound and the yen held in the foreign exchange reserves.
The reserve losses are primarily due to the RBI selling dollars to stem the rupee volatility in the spot and forwards market to prevent runaway moves in the exchange rate. Last week, the rupee stood ground and lost just 10 basis points against the dollar and the currency traded in the 81.61-82.29 range. The rupee ended at 82.55 on Friday.
The country's gold reserves and SDR holdings too saw a reduction in the week under review with both reserves falling USD 110 million and USD 53 million, respectively. The gold reserves and SDR holdings stand at USD 41.92 billion and USD 18.12 billion, respectively. The country's reserve position in the IMF also fell by USD11 million, taking it to USD 5.1 billion.
The reserves have been falling from the peak as the rupee has been under pressure and the monetary authority has been taking measures to defend the rupee from extreme volatility. In 2022, the cost of defending a falling rupee was over USD 115 billion of the reserves.
The worst drop was in the week to February 10 when the reserves plunged by a steep USD 8.32 billion to USD 566.95 billion. In October 2021, the forex kitty had reached an all-time high of USD 645 billion. (With PTI inputs)