India's foreign exchange reserves fell by $1.74 billion to $290 billion for the week ended May 25, the Reserve Bank of India (RBI) data showed Saturday.
The reserves registered a sharp drop for the fourth week in a row, largely due to suspected sale of dollar by the central bank to defend rupee, according to the data.
The forex reserves had declined by $1.80 billion, $1.37 billion and $2.18 billion, respectively, in the previous three weeks.
Foreign currency assets, the biggest component of the forex reserves kitty, fell by $1.71 billion to $254.40 billion during the week ended May 25, according to RBI's weekly statistical supplement.
The RBI did not provide any reasons for the change in foreign currency assets.
It said the assets expressed in US dollar terms included the effect of appreciation or depreciation of non-US currencies such as the pound sterling, euro and yen held in reserve.
However, the RBI is understood to have sold dollars from the reserves to curb the slide in the value of rupee.
The Indian rupee slumped to a record low in recent weeks and stood 55.54 against a dollar Friday. The rupee witnessed loss for the ninth consecutive week, the longest losing streak since the 2008 economic crisis.
The value of special drawing rights fell by $18.6 million to $4.38 billion, and India's reserves with the International Monetary Fund fell by $12.1 million to $2.85 billion.
The value of gold reserves remained unchanged at $26.61 billion.
Can't arrest Re fall if driven by weak fundamentals: RBI - Daily Pioneer
"If the rupee fall is due to fundamental weakness of the economy, or due to global factors, then the RBI cannot support it," RBI Deputy Governor K C Chakrabarty told reporters on the sidelines of an HR summit of the state-run banks here.
The government must address trade deficit issues if the fall of the rupee is due to weak fundamentals, he added.
"If the rupee is depreciating due to real sector issues, financial sector measures will not solve it," Chakrabarty said.
The rupee has been losing value against all the major currencies, especially the American dollar, since April and hit an all-time low of 56.52 yesterday. It has shed nearly 24 per cent year-to-date.
As a measure to contain dollar demand and help support the rupee, Chakrabarty also hinted at opening a separate window for oil companies.
"The option (of opening a separate dollar window for oil companies) is open. Whether they (RBI) is doing it or not, I don't know, because it will not be done in the public view," he said.
As the rupee loses ground almost everyday against the US dollar, with the hands of RBI are tied in view of depleting forex reserves, there have been talks of directly selling dollars to oil companies -- the biggest consumers of the greenback -- by opening a separate window for them.
The move can take off the demand pressure from the open market for the dollar.
Oil has been the biggest component of the country's import bill for decades. In FY'12, out of the total import bill of USD 488.6 billion, as much as USD 155.6 billion was on account of oil as India meets 70 per cent of its fossil fuel needs through imports.
This has widened the current account deficit to over 4 per cent last fiscal, as against 2.6 per cent in 2010-11.
Also, fiscal deficit shot up last fiscal hitting 5.76 per cent of the GDP, from a projection 4.6 per cent.
Economists have been blaming these factors for the plight of the rupee, apart from fall in investments, which came down to 30 per cent in FY'12 from 38 per cent in FY'08.
Without referring to the forthcoming mid-quarter review of the monetary policy slated for June 18, the RBI Deputy Governor said, "If inflation comes down then interest rate will also come down."
On the highly disappointing GDP numbers, he said it does not matter if it is 6.5 or 7 per cent, if we take corrective measures. Unless we work hard, GDP will fall further."
According to the GDP data released yesterday, India's growth rate during 2011-12 slipped to 6.5 per per cent from 8.4 per cent in the preceding two financial years.
Even during the 2008-09, the year when the country was facing the impact of the global financial meltdown, growth rate was higher at 6.7 per cent.
Money a good thing in Scott Walker recall election - Washington Times
SALT LAKE CITY, June 2, 2012 — Wisconsin voters look poised to deliver a fairly telling vote of confidence for their governor, Scott Walker.
To Democrats, whose heretofore legislatively-guaranteed political advantages have helped them to engineer the recall, Walker's probable victory only serves as proof that the Republican governor is unfairly buying the election.
Setting aside the obvious hypocrisy of the conventional wisdom that President Obama's unprecedented war chest represents the enthusiasm of millions of ordinary Americans, the idea that Governor Walker's win is tainted by the millions he has spent to run the campaign is preposterous.
Preposterous because it relies on a number of assumptions that are antithetical to American democracy.
The first of these assumptions is that voters can't discern issues for themselves, that they are simply mindless automatons who are easily hypnotized by seductive advertising.
If that is the case, perhaps President Obama's impressive victory in 2008 wasn't so impressive after all, considering that he outspent his rival many times over in the closing weeks of the presidential contest.
Closer to home, the recall effort against Walker himself was financed by those with a stake in getting him out of office. He did not ask for this election, so for liberals to complain that he is raising and spending money in an effort to make his case to voters is a bit disingenuous.
Of course it was their perfect right to dedicate their own time and resources to the recall effort. Indeed, in a participatory democracy, it should be lauded. So too, should the contributions and participation of thousands of donors who have decided to commit their resources to the governor.
John Nichols complains in the Capital Times, a left-leaning newspaper, that Walker exploited a "loophole in Wisconsin election law which removes contribution limits for officials seeking to prevent a recall election." He neglects to mention that the loophole is purposeful and consistent, since no limit exists on raising funds to mount a recall in the first place.
Nor should there be. Citizens who choose to engage in politics shouldn't be hindered by laws designed to restrict how they spend time or money. And it seems ridiculous to expect that a sitting governor should be powerless while his opponents amass their forces against him setting up a recall.
Another faulty assumption that liberals make is that money from business associations (to which they try to tie Walker) is somehow less virtuous than money from other types of associations.
The Left's preferred association is the labor union, and it was they who organized what might very well turn out to be the most colossal strategic error of the past decade. Nevertheless, the fight is almost completely over union money—whether union bosses can use the machinery of the state to forcibly extract political funds from public employees—and initially financed by union money. If anyone can be accused of trying to buy the gubernatorial seat in Wisconsin, it is the public sector unions, not the current governor who already won it less than two years ago.
A third bad assumption is that money actually moves votes.
ABC news reports that the executive director of the nonpartisan Wisconsin Democracy Campaign is skeptical.
"So far," said Mike McCabe, "the tens of millions of dollars that have been spent on ads don’t seem to have moved the needle very much. Poll numbers haven’t changed much. Walker’s approval ratings haven’t changed. So the tens of millions spent don’t seem to have changed very many minds."
On the other hand, the act of contributing is a civic act that has great importance. It is a way for people to get involved and show their support for one cause or the other. So far, Walker is winning that contest, which infuriates the Left because part of their trope is that they represent the masses.
Recall the weeks and months of large scale demonstrations at the state capitol in Madison, a sign, we were told, that the people were unhappy with the governor. Their mobilization was lauded as high-minded political participation.
Some people skip work and march. Others donate a few bucks.
Democrats regularly try to "buy" elections. Governor Walker's challenger, Tom Barrett, has frantically tried to raise money. The unions have poured in precious dollars during every phase of the foolhardy recall, from the state senatorial elections to that of the state supreme court seat held by David Prosser.
If they could raise more money, they would.
For them to claim that Scott Walker is trying to buy the election simply because he has been more successful at raising money is ignorant of the role of money in American elections, and the freedoms it represents.
Learn more about the author at Rich-Stowell.com
Rich is a teacher and a soldier. In addition to writing the "Rich Like Me" political column at the Washington Times Communities, he is the author of Nine Weeks: A Teacher’s Education in Army Basic Training; Tunnel Club; and Not Another Boring Textbook: A High School Students’ Guide to their Inner Conservative, which you can follow on Facebook.
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