Reuters reports escalating tensions between India and the International Monetary Fund (IMF) following accusations that the Reserve Bank of India (RBI) has excessively intervened in the currency market, allegations that New Delhi rejects.
The IMF suggests that Indian Rupee movements have been heavily restricted since December 2022, implying that the RBI has engaged in "excessive financial interventions" beyond what is necessary to balance the market.
As a result, the IMF has reclassified India's foreign exchange system, noting that financial interventions have caused the system to shift from "floating" to "stabilized via direct intervention."
These accusations have been met with denial from India, which considers them "unjustified." India insists that the IMF's assessments do not match the current financial and economic reality.
The Indian Rupee depreciated by 2% against the US dollar between December 2022 and October 2023.
Economic estimates suggest that the RBI may have intervened with up to $78 billion to support the Rupee during this period.
While India works to bolster its foreign exchange reserves, the debate over the central bank's intervention and monetary policy remains extremely sensitive, particularly following the United States placing India on its monitoring list due to currency value interventions.
