On September 23, the value of the rupee vis-a-vis the dollar fell to a new low: it crossed Rs 81 to a dollar after some weeks of relative stability when it hovered between Rs79-80. And it fell despite the Reserve Bank’s running down of foreign exchange reserves in a bid to hold up its value.
In fact, foreign exchange reserves had reached their highest level in October last year, but since then there has been a decline by over $90 billion until September 23 to just below $550 billion. A part of this decline is because of revaluation: reserves are held in several currencies apart from the dollar, and the decline in the value of the euro vis-a-vis the dollar has been a contributory factor to the fall in the dollar value of our reserves. But the bulk of the fall has been on account of the RBI’s selling off dollars to hold the rupee stable. And yet the rupee has fallen.
With the rupee’s fall our imports become costlier, especially universal intermediaries like oil, whose dollar price in any case has increased in the world market in the wake of
— source newsclick.in | Prabhat Patnaik | 01 Oct 2022