We’ve Enough Forex Reserves, Hiking Interest Rate Will Help Reduce Inflation: Raghuram Rajan

New Delhi: Former governor of the Reserve Bank of India, Raghuram Rajan on Saturday appreciated the central bank’s decision of increasing reserves saying that “we have sufficient foreign exchange (forex) reserves”, reported news agency ANI. Speaking in the context of economic turmoil in Sri Lanka, Rajan said, ” We’ve sufficient foreign exchange reserves. RBI has done a good job in increasing the reserves. We’re not having problems like Sri Lanka and Pakistan. Our foreign debts are also less.”

As per the latest data by the RBI, India’s foreign exchange reserve stood at $571.56 billion for the week ended July 22. During the week ended July 22, the forex reserves dropped by $1.152 billion. The decline in the forex reserve was attributed to the drop in foreign currency assets, according to the Reserve Bank of India’s weekly statistical supplement, adding that all other components of the forex reserve registered gains during the corresponding week. 

India’s foreign currency assets, which are the biggest component of the forex reserves, fell by $1.426 billion to $510.136 billion during the week ended July 22. The foreign currency assets had declined by $6.527 billion during the week ended July 15 and by $6.656 billion in the previous week.

Raipur, Chhattisgarh | We’ve sufficient foreign exchange reserves. RBI has done a good job in increasing the reserves. We’re not having problems like Sri Lanka and Pakistan. Our foreign debts are also less: Former RBI Governor Raghuram Rajan on economic turmoil in Sri Lanka pic.twitter.com/tMfVxWhBQH

— ANI (@ANI) July 30, 2022

Expressed in terms of the US Dollar, the foreign currency asset includes the effect of appreciation or depreciation of non-dollar currencies like the Euro, UK’s Pound Sterling, and Japanese Yen held in the foreign exchange reserves.

As per the RBI Weekly Statistical Supplement, India’s reserve position in the International Monetary Fund (IMF) rose by $23 million to $4.96 billion during the week ended July 22. 

 Speaking on hiking interest rates by the RBI, Rajan said that the move will help in reducing the inflationary pressure.

At present, there is inflation all over the world. RBI is increasing interest rates which will help in reducing inflation. Most inflation is in food and fuel. As we can see food inflation is coming down in the world and will decrease in India also, he said, stated the ANI report.