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India's high foreign exchange reserves not enough to shield rupee

A sharp rise in oil import bill has led to a big decline in forex reserves to imports in FY22

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Historically there is a high negative correlation between the import cover of India’s forex reserves and the crude oil prices

Krishna Kant Mumbai

4 min read Last Updated : Jan 28 2022 | 6:02 AM IST

With crude oil touching $90 a barrel in international markets, India’s record foreign exchange (forex) reserves of $634 billion may not be enough to shield the rupee from the adverse effects of a spike in oil prices.

There has been a sharp rise in India’s overall import bill in the first nine months of FY22, leading to a decline in import cover despite record forex reserves.

Forex reserves at the end of December 2021 were equivalent to 12.8 months of India’s merchandise imports, down from a record high of 17.7 months in FY21.

The ratio is expected to decline further

Topics : Forex Indian Economy Foreign exchange reserves Rupee Crude Oil Crude Oil Prices Oil imports

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