Till that time, the governor stressed on focusing on dealing with “the current global hurricane with confidence and endurance”.
“The terminal interest rate for the US Fed is anybody’s guess, but it cannot be the case that their monetary policy will be tightened endlessly,” Das said Wednesday in his monetary policy commentary.
“When the tightening is over, the tide will surely turn. Capital flows to India will improve and external financing conditions will ease,” he said.
The trend in India’s forex reserves has already shown a U-turn. After shedding a massive $120 billion between October 2021 and October 2022, the reserves have started rising again.
Net foreign direct investment flows rose to $22.7 billion during April-October from $21.3 billion in the corresponding period last year. Foreign portfolio flows were positive at US$ 11.8 billion during July to 5th December, led by equity flows. These led to a rise in foreign exchange to $561 billion at the end of December 2 from $524.5 billion on October 21, covering around nine months of projected imports.
“In this complex world with both push and pull factors at play, the rupee – which is market-determined – should be allowed to find its level and that is what we have been striving to ensure,” Das said.
Even as the dollar showed strength against all major global currencies, the rupee movements have been the least disruptive, relative to peers. From April to October this year, the local currency appreciated by 3.2% in real terms, even as several major currencies have depreciated.
“The story of the rupee has been one of India’s resilience and stability,” Das said Wednesday after announcing a 35 basis point rise in repo rate to 6.25%.
