INDIA EXTERNAL POSITION REMAINS STRONG TO WITHSTAND NEAR-TERM SHOCKS, SAYS IMF

Published on Dec 20, 2023 12:57

The International Monetary Fund in its annual Article IV review stated that that India�s external position remains strong and can withstand near-term shocks. In terms of published data, the current account deficit and the external financing requirement are modest at 1.1 percent of GDP during April-June 2023. Reflecting these factors, they noted an increase in the foreign exchange reserves of US$ 24.4 billion excluding valuation effects, which is a further attestation of the strength of the country�s external position. The IMF further noted that there was significant divergence of views on the exchange rate and FXI assessments. The RBI, however strongly disagreed with staff�s assessment that FXI likely exceeded levels necessary to address disorderly market conditions and has contributed to the Rupee-USD moving within a narrow range since December 2022. In their view, staff�s assessment is short-term and restricted to the last 6-8 months without any rationale for the same, and if a longer-term view of 2-5 years is taken, staff�s assessment would fail.