A member of the Economic Advisory Council on Monday said the Reserve Bank of India (RBI) is justified in using the country’s foreign exchange reserves to address volatility in the rupee’s movement against the dollar.
Sanjeev Sanyal told Reuters Global, “I think the Reserve Bank of India is right to use foreign exchange reserves to smoothly move to INR/USD… there is no point in targeting INR/USD levels when USD It is appreciating compared to all other big companies.” Market Forum (GMF) in an interview.
“In the long term, we need to maintain overall macro-stability and allow the cycle to turn on its own,” said Sanyal, who was earlier India’s chief economic advisor.
The council he now sits on advises Prime Minister Narendra Modi and his government on economic policy.
The Indian rupee has so far fallen 7.4 percent against the dollar and has reached a record low of 80.0650.
The dollar has gained about 11.2 per cent against a basket of currencies as markets call for a hike in US interest rates amid rising inflationary pressures and signs of a weakening global economy.
Mr. Sanyal also said that India’s inflation was almost entirely imported and as an oil importer, nothing could be done in the short term to control it. Global oil and other energy costs have risen this year, driven by the effects of the war in Ukraine and wider supply chain issues.
He said he believed India’s current account deficit was in a comfortable position and when asked whether curbs on non-essential imports were being considered, he said: “The government has evolved from the situation. Will respond flexibly when it happens.”
Mr. Sanyal also said that India was treating crypto instruments as assets, not currency, and that their regulation would require global coordination.