India confident in forex reserves to tackle rupee slide, sees limited impact from US oil sanctions on Russia

Amidst a record depreciation of the rupee vis-à-vis the US dollar, sources within the Indian government have indicated that there are ample foreign exchange reserves available to rein in any further depreciation of the INR.

Government sources have indicated that India does not expect any major impact from the US sanctions on Russian exports. They assured that the availability and affordability of petroleum imports will not be an issue for India.

On Friday, the US Treasury imposed sanctions on Russian oil producers Gazprom Neft and Surgutneftegas, as well as 183 vessels that have shipped Russian oil, as it targeted the revenues Moscow had used to fund its war with Ukraine.

Sources also indicated that growth in India’s renewable energy capacity and the electric vehicle (EV) ecosystem is expected to reduce the growth trajectory of oil demand in the near future.

They also expressed hope that India’s exports of goods and services will benefit from a fall in the rupee, which will bode well for an export-driven economy.

The rupee reached a new low of ₹86.58/$ on Monday, January 13, falling 0.7%. This 0.7% decline was the sharpest in 10 months. On Monday and today, the rupee underperformed compared to other Asian currencies. The drop in the rupee on Monday was mainly caused by a sharp rise in the dollar index and US yields.

According to a CRISIL report, India’s current account deficit (CAD) is projected to remain at 1% of the GDP for the current financial year, up from 0.7% reported in the previous financial year.