India's Forex Reserves surpass Russia's to become world's 4th biggest
India's reserves, enough to cover roughly 18 months of imports, have been bolstered by a rare current-account surplus
India's foreign-exchange reserves have surpassed Russia's to become the world's fourth largest, as the country’s central bank continues to stock up on dollars to cushion the economy against any sudden outflows.
India's foreign currency holdings, which dropped $4.3 billion to $580.3 billion on March 5 as per the Reserve Bank of India (RBI), surpassed Russia's $580.1 billion, says a Bloomberg report.
India pulled ahead as Russian holdings declined at a faster rate in recent weeks as RBI continues to hoard dollars to cushion the economy against any sudden outflows.
India's reserves, enough to cover roughly 18 months of imports, have been bolstered by a rare current-account surplus, rising inflows into the local stock market and foreign direct investment.
Analysts say a strong reserves position gives foreign investors and credit rating companies added comfort that the government can meet its debt obligations despite a deteriorating fiscal outlook and the economy heading for its first full-year contraction in more than four decades.
The report quoted chief India economist at Deutsche Bank Kaushik Das as saying, “India's various reserves adequacy metrics have improved significantly, particularly in the last few years."
"The healthy FX reserves position should give enough comfort to RBI for dealing with any potential external shock-driven capital-stop or outflows in the period ahead,” he said.
The RBI bought a net $88 billion in the spot forex market last year, central bank data show. That helped make the rupee the worst performer among Asia's major currencies last year and earned India a place on a U.S. Treasury watchlist for currency manipulation. The rupee strengthened about 0.1% on Monday to 72.71 per dollar.
A recent RBI report recommended further strengthening of foreign-exchange reserves, citing swings in the rupee around the time of the global taper tantrum in 2013. Governor Shaktikanta Das has said that emerging market central banks need to build reserves to prevent any external shocks, irrespective of being put on watch by the U.S.