India has Enough Forex Liquidity reserves to meet the demand
A Statement from RBI says, “ in anticipation of financial market turbulence related to the US debt ceiling impasse, the Reserve Bank made an assessment of the ability of the forex reserve portfolio to meet potential forex requirements in the event of significant capital outflows. This exercise indicated that there were sufficient liquid reserves to meet the demand for forex even in stress scenarios. The Reserve Bank is closely monitoring all key indicators and will continuously assess the impact of global developments on Rupee and forex liquidity and macroeconomic stability. We will respond quickly and appropriately to the evolving situation ”.
RBI adds, “ As Friday's market behaviour demonstrated, India is not insulated from such developments. It may, however, be noted that in the worst phase of the recent global financial crisis, the economy grew by 6.8 per cent, suggesting high resilience emerging from domestic factors. While downside risks to growth may have increased in the wake of global developments, they are likely to have limited impact. However, the policy and regulatory framework must anticipate and be prepared to respond to turbulent financial market conditions arising out of external developments ”.