The fall in its forex reserves to around $533 billion currently, from a peak of about $634 billion in 2021, is driven in part by India's growing current account deficit, says S&P.
Ind-Ra expects India’s merchandise exports to slow down despite touching a record high of $121.2 billion in Q1 FY23
The rating agency expects the current account deficit to have moderated to $17.3 billion (1.96% of GDP) in the fourth quarter of FY22.
The current account deficit was at 2.7% of the GDP in the third quarter of financial year 2021-22.
According to a BofA Securities report, the Covid-19 shock could delay India touching the GDP of Japan by three years. In their latest estimates, it will now happen by 2031 if the economy grows at 9%.
The delay in stimulus announcement is disappointing and raises the probability that a stimulus, if any, might be weaker than expected, says Jefferies India.
The amount is just 0.8% and 5.8% of India’s GDP and foreign exchange reserves, respectively. And the maturity profile is reasonably spread out in FY21.
Since April 2001 foreign exchange reserves grew 11.15 times to $476.09 billion in mid-February; the RBI may add $21 billion more by March 2021, according to a BofA Securities report.
The rapid devaluation in the currency is the remedy that countries use to resolve various imbalances in the economy.
The overhang of debt of many emerging countries could potentially spark off another crisis in the global economy.
