The Reserve Bank of India's recent defence of the rupee against the dollar is putting pressure on the nation's foreign exchange reserves, prompting analysts to call for reduced intervention.
India's forex reserves, excluding gold, now cover just 8.7 months of imports, the lowest in three years, according to data from Bloomberg.
The RBI's intervention has left it with less firepower, which could lead to more problems if the ongoing crisis in the Middle East continues, said Indranil Pan, chief economist at Yes Bank Ltd.
India needs a forex reserve buffer of at least $1 trillion for robust intervention capacity, according to former RBI Deputy Governor Michael Patra.
The RBI's ammunition to support the rupee is lower after accounting for its outstanding dollar sales, with its forward book at $67.8 billion at the end of January.
