Potential Forex reserve crisis risk

This by a friend’s relative is important for all to know as we get bogged down in unnatural headlines created by media.

Why do we need Forex?

We need reserves of foreign currencies with the RBI to meet our

A. Import expenses
B. Repayment of external debts
C. Investments abroad
D. Services like education, medical treatment, tourism, on-site projects etc

We earn forex through exports. And add more dollars thru loans

Overall imports in April-November 2022 are estimated to be USD 610.70 Billion.

India's overall exports (Merchandise and Services combined) in April-November2022 are estimated to be USD 499.67 Billion.

As per RBI reports at end-September 2022, India's external debt was placed at US$ 621.5 billion

The external debt to GDP ratio stood at 19.2 per cent as at end- September 2022

More than 40%, or $267 billion worth of external debt of the total $621 billion, is due for repayment in the next nine months, the Reserve Bank of India data showed.

This repayment is equivalent to about 44% of the India's foreign exchange reserves.

The rupee fell to a new record low of ₹82.87 to the US dollar on 24th Feb.

When the exchange value of Indian Rupee falls against the US Dollar, it means that we as a Nation will have to pay more Rupees against the Dollar loans.

More than the dollar value at the time of loan.

Economists estimate the current account deficit, or excess of imports over exports, will touch 3.1% of India's GDP, up from 1.2% last year.

From the meagre GDP Growth that we do, a large portion of that drains out for our growing imports and paying back loans with a weak Rupee

India's foreign exchange (forex) reserves dropped by $5.68 billion to $561.26 billion for the week ended February 17th, the lowest in 11 weeks and the Reserve Bank of India likely sold dollars to prevent further weakness in rupee.

The value of gold reserves slumped by $1.04 billion to $41.81billion.

Special Drawing Rights (SDRs) fell by $87 million to $18.26 billion and India's reserve position with the International MonetaryFund (IMF) dropped by $34 million to $5.11 billion during the last week.

The forex reserves have dipped amid continued selling pressure in the Indian equities markets, especially by the foreign institutions. "The domestic market is broadly demonstrating a lack of confidence despite global markets turning green

Gross domestic product (GDP) growth in the last quarter slipped to an annual 4.6%, according to the median forecast of 42 economists in the February 10-24 survey.

It is expected to slow further to 4.4% in the current quarter, and across 2023/24. more  

View all 7 comments Below 7 comments
I agree with the views endorsed by Anil Chandok. Where will it all end??? more  
This is the second time that India has the chance to become the factory of the world (first was in 1970s). Again India is going to miss out BECAUSE of petty politics, labour laws, investment, skilled manpower, infrastructure BUT most importantly because of entrenched and corrupt bureaucracy and lack of law & order in rural areas where cheaper land is available for industries. more  
Now the world knows why East Asian products including Indian are cheap and environmental friendly. The produce is less costly. That is why GDP and cost of living. The GDP as growth index needs to be changed. 2.The currency values should be the life index and not artificial to no produce country exchange more  
Very helpful information more  
Imports should be reduced. There is scope for reducing foreign travel, when business can be conducted online, saving foreign exchange. more  
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