IMF advises India to let rupee move as first defence amid oil shock
Official says exchange rate should absorb shocks; RBI interventions offer limited near-term benefit
The International Monetary Fund has advised India to allow the dollar-rupee exchange rate to fluctuate as the first measure to counter the current oil crisis, according to Krishna Srinivasan, Director of the Asia and Pacific Department at the IMF. During a media briefing in Mumbai, Srinivasan stated that countries should utilize the exchange rate as their primary defense against such shocks.
The Reserve Bank of India (RBI) has been actively intervening to stabilize the rupee through dollar sales from its reserves, providing special windows for oil companies to obtain dollars, and imposing reserve requirements for large hedge funds. Although the rupee had plummeted to near-record lows earlier in the month before recovering by approximately 2 percent following the RBI's interventions, Srinivasan emphasized that these foreign-exchange measures have limited long-term benefits due to the ongoing oil shock.
He further highlighted that exchange rates must function as shock absorbers. In June, India lowered taxes on foreign investments in government debt and mobilized $134 billion through a dollar deposit scheme aimed at attracting investments from the Indian diaspora. The RBI's fiscal maneuvers in June proved beneficial by attracting capital inflows, as per Ranil Salgado, the Senior Representative for India, Bhutan, and Maldives at the IMF.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
