While Adani is in sharp focus, here is what’s happening to Indian economy
The past few weeks were all about Adani, Hindenburg and George Soros. And then the Congress’ 85 plenary session and ED raids on its leaders and arrest of its spokesperson took over. In the melee, the economy was relegated to the backseat.
The headlines on forex reserves hitting 11-week low, rupee trading in a thin range of 82.56 to 82.89 and exports declining almost went unnoticed. Here’s bringing back those headlines in bold!
Thinning Forex Reserves
• Declined by $5.68 billion to an 11-week low of $561.267 billion for the week ended Feb 17
• Is the third week in a row when forex reserves dipped
• For the week ended Feb 10, they declined by $8.32 billion to $566.948 billion and by $1.49 billion for the week ended Feb 3
• Declined by over $15 billion in February
Decline in all components
• Foreign currency assets, the biggest component of forex reserves, dipped by $4.51 billion to $496.07 billion
• Value of gold reserves slumped by $1.04 billion to $41.81billion
• Special Drawing Rights (SDRs) fell by $87 million to $18.26 billion
• India’s reserve position with the International Monetary Fund dropped by $34 million to $5.11 billion during the last week
We need foreign exchange reserves
• To meet import expenses
• Repayment of external debts
• Investments abroad
• For services like education, medical treatment, tourism, on-site projects
• To ensure RBI has backup funds if the rupee rapidly devalues
How we earn forex
Through exports and add more dollars through loans
Exports:
• Dipped by 6.58% to $32.91 billion in January
• Contracted for the second month in a row. In Dec 2022, declined by 12.2% to $34.48 billion
• Engineering exports dipped 3.37% to $88.27 billion during April-January 2022-23. Gems and jewellery shipments declined 0.54% to $31.61 billion
Imports
• In the 10-months of the current fiscal, crude oil imports rose 53.54% to $ 178.45 billion
• Imports of coal, coke and briquettes were up 18.91% to $43.17 billion
Economists estimate the current account deficit (excess of imports over exports) will touch 3.1% of India’s GDP, up from 1.2% last year
Burden of Debt
• As per RBI reports, as of September 2022, India’s external debt stood at at $621.5 billion. External debt to GDP ratio was at 19.2%
• More than 40%, or $267 billion worth of external debt of the total $621 billion, is due for repayment in the next nine months
• This repayment is equivalent to about 44% of the India’s foreign exchange reserves
Sliding Rupee
So far in this month, the rupee has fallen by 81 paise. It depreciated to 82.75 on February 24 from 81.94 on February 1, 2023
As rupee falls against the US Dollar, it means the nation has to pay more rupees against the dollar loans
Slowing GDP
Gross domestic product growth in the December quarter slipped to an annual 4.6%, according to the median forecast of 42 economists in the February 10-24 survey
It is expected to slow further to 4.4% in the current quarter, and across 2023-24
With inputs from Agencies and @paul_koshy
