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India’s foreign exchange reserves provide a crucial cushion against geopolitical turmoil, inflation, and currency pressure, says RBI member. | Photo Credit: iStockphoto
India’s $700 billion in foreign exchange reserves gives the economy a crucial cushion against rising geopolitical turmoil, a member of India’s rate-setting panel said, as hostilities in the Middle East continue to deepen.
Ram Singh, an external member of the monetary policy committee with the Reserve Bank of India, said in an interview with the Economic Times newspaper that he expects the country’s foreign-exchange buffer to help blunt the impact of inflation caused by rising crude and fertilizer prices.
However, Singh warned that the Indian rupee could come under pressure due to the worsening geopolitical climate and recent outflows of $5 billion in foreign investment from the bond market. The currency weakened to its lowest level in three months last week, before partially recovering to close at 86.59 to the dollar Friday.
Singh’s comments come as tensions in the Middle East intensify following US and Israeli strikes targeting Iran’s nuclear program. Benchmark crude prices have risen more than 22 per cent in the last one month.
Prime Minister Narendra Modi said in a post on X on Sunday that he discussed the situation with Iranian President Masoud Pezeshkian and “reiterated our call for immediate de-escalation, dialogue and diplomacy as the way forward.” Iran has said it does not seek to escalate the war but will respond to aggression by Israel and the US.
Spoke with President of Iran @drpezeshkian. We discussed in detail about the current situation. Expressed deep concern at the recent escalations. Reiterated our call for immediate de-escalation, dialogue and diplomacy as the way forward and for early restoration of regional…
— Narendra Modi (@narendramodi) June 22, 2025
Despite the risks of a weakening rupee, Singh said he expects inflation to stay below the RBI’s target of 4 per cent. The central bank has monetary, regulatory and forex market tools to maintain stability if the ongoing crisis causes stress on the financial market and puts pressure on the currency, he said.
Singh further defended the RBI’s 50-basis-point cut during its last policy meeting, saying it was needed to support demand growth by reducing the cost of funds of borrowers. He added that further easing is possible but will depend on how global risks evolve.
“Our rate cut decision is fully justified, coming on the back of strong fundamentals and a stable outlook on the domestic fronts, including fiscal prudence and a benign inflation forecast,” he said.
More stories like this are available on bloomberg.com
Published on June 23, 2025
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