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 big question is how much more foreign exchange will the Reserve Bank of India buy, and why?
While gloom prevails across economies, a State Bank of India report says that the Reserve Bank of India has been relatively successful in ensuring financial stability in the market since May.
While the rating agency downgraded India’s sovereign rating, BofA Securities’ economists see the present downturn as cyclical rather than structural; say fiscal stimulus is critical for recovery.
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.
Despite a lower tax mop-up and the shortfall in disinvestment target, government receipts are seen growing 6% in FY20, thanks to RBI’s large dividend. But FY21 would be different.
In the week ended October 4, India’s forex kitty swelled to an all-time high of $437.8 billion. In the 471 weeks from October 2010, it has crossed the $400-billion mark 81 times.
