MUMBAI: Veteran banker Uday Kotak has warned that India’s foreign exchange reserves remain strong but leave “little room for complacency”, as large foreign capital inflows expose the economy to global volatility risks. At the ET Awards, Kotak said India has received around $1.5 trillion in foreign capital through FDI and FDI, which creates vulnerability if investors withdraw during periods of uncertainty. He said the country currently has about $700 billion in reserves, including gold and Special Drawing Rights, which are stronger than in previous decades but may not be enough to absorb large outflows. “The reserves are comfortable but they are not something we can take for granted,” Kotak said.
Regarding the rise in oil prices, Kotak said that if the price of crude oil continues to be between $90 and $100 per barrel, India’s current account deficit may widen from about 1% of GDP to 2.5%, requiring financing of $150 billion annually.
