Having said that Reserve Bank of India has already used $150 billion out of that kitty. The 700 billion has become 580 or 590. I mean, I could be messing up with the numbers, but I think it is $150 billion broadly has been used. So, do you think Reserve Bank of India is unlikely to intervene in a very strong manner because $150 billion gone and rupee is still weak?Anindya Banerjee: Yes, RBI has extinguished some part of its reserves, that is a combination of actual sales on the spot market as well as a valuation loss because RBI holds a substantial amount of reserves in non-dollar. So, when you convert it because dollar is strong, there is a translation loss. But the current reserves close to 600, little less than that, it is ample enough and plus RBI intervenes through various other markets like the forward market, the NDF market.
So, there is ample opportunity for RBI to intervene and RBI has to keep intervening because at least after the Trump administration comes in, the volatility in the currency can increase in case Donald Trump presses ahead with his America first policy, which can be ultra protectionist. Many believe that the RBI cannot help and resurrect the situation? What is your own sense on whether the RBI is going to jump in to try and arrest the rupee?Anindya Banerjee: See, when we are looking at USD-INR, we have to actually broaden the scope. So, how has rupee done against the other currencies? So, if we take a one-year time frame or let us say if we take the time from which the US election happened, that is early November, Indian rupee has depreciated yes, but it has depreciated much less than what other currencies have. So, on average, we have done much better. But whenever there is a strong trend in the dollar on the upside, it is very hard and it does not make economic sense to stay strong because then it creates overvaluation problem, it starts to impact your exports. So, RBI has always been targeting volatility and they would continue to do so rather than trying to target a particular level.What is your sense on where the rupee could stabilise because right now it seems like in a free fall zone?Anindya Banerjee: See, it could be around 87, it stabilises, but that entirely depends on the dollar index. As I said, at this point in time, it is all anticipation in the market what will Donald Trump do. So, how far is he going to press ahead with his America first policy? Is he going to be far more aggressive than his term one? The indications are yes, he could be quite aggressive. So, if he is, then dollar index can actually head towards 115, 116, which was the high around 2022 and in that case, USD-INR may actually try and push above 87.
