392.9bil­lion

The Economic Times - - Finance & Commodities - This num­ber will de­pend on two fac­tors: the pace at which the cen­tral bank chooses to build re­serves and the im­port bill. For In­dia, the im­port bill depends ma­te­ri­ally on com­mod­ity price lev­els. The cen­tral banks can man­age the for­mer to an ex­tent, but ha

chief In­dia econ­o­mist, Bar­clays Cap­i­tal

over 10 months’ im­ports, is still lower than the pre-cri­sis lev­els in 2008, while re­cov­er­ing from the 2012-13 lows,” said Sid­dhartha Sanyal, chief In­dia econ­o­mist, Bar­clays Cap­i­tal. “Going ahead, this num­ber will de­pend on two fac­tors: the pace at which the cen­tral bank chooses to build

re­serves and the im-

port bill. For a coun­try like In­dia, the im­port bill depends ma­te­ri­ally on com­mod­ity price lev­els. The cen­tral banks can man­age the for­mer to an ex­tent, but has lit­tle con­trol over the lat­ter, which depends on global com­mod­ity prices.” The ra­tio depends on the level of for­eign ex­change re­serves in an econ­omy and its im­port bill in a given month. There are fears that the re­serves could fall if the US Fed de­cides to unwind quan­ti­ta­tive eas­ing re­sult­ing in forex pull­out from emerg­ing mar­kets, in­clud­ing In­dia. But, In­dia’s im­port bill is sen­si­tive to global com­mod­ity prices if they rise or if the econ­omy re­vives re­sult­ing to higher im­port de­mand. “More­over, the ra­tio could again slip in the fu­ture in case of stronger eco­nomic re­cov­ery and faster growth in im­ports de­mand. Thus, al­though build­ing re­serves comes at a cost, we feel that the RBI will likely main­tain tol­er­ance for the safer op­tion of main­tain­ing some­what higher for­eign ex­change re­serves,” Sanyal said. “For coun­tries with less open cap­i­tal ac­counts, im­port cover is of­ten seen as a rel­e­vant mea­sure, high­light­ing how long im­ports can be sus­tained in the event of a shock,” an IMF re­search pa­per of 2015 stated.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.