India loses $63 billion in six months

The country’s central bank has seen its forex reserves shrink more than $63 bn — enough to fund 600 Moon missions — as exports slumped, trade deficit widened and FIIs pulled out of the stock market, report Rajesh Mahapatra and Gaurav Choudhury. Tycoons tumble | See graph

India’s richest are not the only ones who have lost billions in net worth amid the global meltdown. The country’s central bank has seen its foreign exchange reserves shrink more than $63 billion — enough to fund 600 Moon missions — in less than six months as exports slumped, trade deficit widened on a surge in the oil import bill and foreign investors pulled out of the stock market.

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Lately, the reserves are falling at an alarming pace, squeezing much of the room for manoeuvre that India had in the face of the ongoing financial turmoil. The fall was a staggering $31 billion in October, or almost half of the decline since May 23, when reserves touched a record $316 billion.

The fast depletion has serious implications, as it could bring more pressure on the rupee, which has already depreciated about 20 per cent this year and made everything from imported machinery to foreign travel and education more expensive. A weaker rupee could also reverse the recent slide in inflation.

“If this trend continues for more than three months, there could be a problem,” said a top monetary policy official, who didn’t want to be named because the issue is market sensitive.