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RBI's reserves adequacy ratio — an average of IMF measures under four forex regimes, now stands at 236 percent, down from 266 percent in September 2024 when the foreign exchange reserves had peaked to $705 billion. But it is still significantly higher than 176 percent seen during the taper Tantrum in August 2013, shows a study by Nomura.
The four regimes it talks about are fixed exchange rate regimes with and without capital controls and a floating exchange rate regime with and without capital controls. India’s reserves adequacy is the highest among emerging Asian peers ( excluding Japan) in all the matrices, the data showed.
A study by Bank of Baroda’s research team shows that there has been a significant pressure on global currencies since November 01, 2024, which is before the US elections result till 10 Jan 2025. They depreciated anywhere between 7.6% (South Africa Rand) to 2 percent (Thailand Baht). In the same period, the dollar, as measured by the DXY rose by 5.1 percent. The average depreciation in the sample of currencies is 4%, in comparison, INR depreciated by only 2.2 percent.
“ A point of stress could be a decline in forex reserve adequacy ratio to below 180%. We note that, when India faced significant balance of payments stress after the 2013 taper tantrum, forex reserve adequacy reached a low of 176 percent in August 2013 “
