In the September month, Indian foreign exchange touched a whopping mark of US$402.5 billion which as per the Development Bank of Singapore is good enough to combat any external vulnerabilities. In a report on Indian bank, the financial services major said that the import cover that is overall reserves less gold is way improved than in the 2013 taper tantrum.
The term taper tantrum refers to the increase in the yields of the US treasury that was the result of gradual stimulus reduction in the US economy. Indian rupee reeled during this time. Since then which saw Indian foreign reserves stand at the lowest levels of USD 275 billion in August 2013, the collection has only grew. The rise has been attributed to a constant increase in FPI, net investment flows as well as narrower CAD.
The Singapore based bank today said, "Beyond the strong year-to-date jump, we expect the pace of reserves accumulation to moderate due to slower incremental portfolio flows and wider current account deficit".
As per the DBS, foreign inflows in the second half as also incremental dollar inflows have eased. In case the global risk appetite declines, the authorities will need to dig into reserves so as to trim extreme market volatility.
With Inputs From PTI