The rise in coronavirus cases in India has started impacting the nation’s economy.
The Indian rupee value tumbled down about 2.5% over the past few weeks due to the spread of coronavirus beyond mainland China into some Asian countries.
The Indian currency is the worst performer among the Asian countries in March after escaping a drastic fall in February.
The sharp decline came when the Indian Government reported two new coronavirus cases on March 2, 2020. This, in turn, has increased fears among the local market players.
Apart from the contagion, the faltering economic conditions and fragile investor sentiments in the nation have impacted the Indian currency value.
At this very juncture, the economists claim that the huge foreign exchange reserves worth USD 476 billion in India may come in handy to fortify the rupee’s value.
Earlier in 2019, India collected dollars all through the year and stood top among the Asian countries in foreign exchange reserves.
According to the report by Bloomberg, Indian foreign exchange reserves increased by USD 64 billion in 2019 and the Central Bank of India added another USD 18 billion in 2020. This led to the record collections of USD 476 billion by February 21, 2020.
Moreover, China added USD 35 billion in 2019, while the foreign exchange holdings increased by USD 8.5 billion in Indonesia and USD 2.2 billion in Malaysia.
“The RBI has big firepower at its disposal in the form of foreign exchange reserves and can easily arrest the rupee’s losses,” said Sajal Gupta, head of foreign exchange at Edelweiss Securities Ltd in Mumbai.
“What we are seeing is a panic rupee reaction, ” Gupta added.
According to Gupta, the Indian Government may deploy some of the foreign exchange holdings to steady the drifting rupee value.
However, the rupee value increased by 0.1% on March 4, 2020 as the Mumbai-based market practitioners sold dollars on behalf of the Central Bank of India.
The coronavirus has so far infected 31 people in India. A Delhi man with travel history to Thailand and Malaysia tested positive for the deadly virus today.
As of now, the global coronavirus death toll reached 3,387 with 98,440 infection cases.
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