India Slams IMF For Criticizing RBI For Their Excessive Intervention In Forex

India on Tuesday slammed the International Monetary Fund (IMF) for accusing the Reserve Bank of India (RBI) of influencing the value of the rupee through excessive intervention in the foreign exchange market. The IMF attributed the narrow movement of the rupee between December 2022 and October 2023 to the central bank”s unnecessary intervention in the foreign exchange market.

With this, the IMF reclassified India”s exchange rate regime from “floating” to “stabilised arrangement” for the mentioned period. However, the RBI attributes the exchange rate stability to improvements in India’s external position. The Indian authorities upheld their right to prevent unwarranted volatility through market intervention.

The rupee traded between Rs 80.88 and Rs 83.42 against the US dollar over the period of December 2022–October 2023 before narrowing it to Rs 82.90–Rs 83.42. The volatility had been dragged down to a decade”s low by the RBI, the IMF alleges. The IMF favours flexible exchange rates as they act as a primary defence against external shocks.

However, the RBI had reduced foreign exchange reserves to stabilise the rupee against the dollar. The intervention might also help mitigate currency risk in the central bank”s efforts to combat inflation, the Times of India reported, quoting ANZ”s forex strategist, Dhiraj Nim.

The IMF is expecting India to grow at 6.3% in the 2023–24 fiscal year, which is below the RBI”s estimate of 7%.