The value of India's foreign exchange reserves will fall further.

Reuters projects that by the end of 2022, India's foreign exchange reserves will have hit their lowest level in more than two years as the Reserve Bank of India continues to defend the rupee against the stronger dollar.

The Reserve Bank of India (RBI) has lowered its foreign exchange reserves by nearly $100 billion to $545 billion from a peak of $642 billion a year ago, and more reductions are forthcoming in an attempt to halt the rupee's plunge to an all-time low against the dollar.

According to the median forecast of 16 economists surveyed by Reuters between September 26 and 27, these reserves are likely to shrink by an additional $23 billion to $523 billion by the end of the year. If realized, it would be the lowest level in more than two years.

Predictions were between $500 and $540 billion.

This suggests that the RBI will continue to deplete its foreign exchange reserves at a rate not seen since the 2008 global financial crisis, when they fell by about 20%.

Compared to the taper-tantrum phase of 2013, when the Federal Reserve unexpectedly halted its purchases of government bonds, it has already depleted its reserves at a substantially quicker rate.

A decade later, India is in a same predicament. In spite of continuous dollar sales and forecasts of more, the rupee reached a record low of 81.95 per dollar on Wednesday, falling nearly 10% against the dollar so far this year.

According to Sakshi Gupta, chief economist at HDFC Bank, "with the recent surge in the rupee, I anticipate that the RBI would continue to intervene, perhaps not to maintain a specific level of the currency, but to reduce volatility."

As the pressure on the rupee and the current account deficit increase, "we will see further interventions in the coming days, resulting in a greater depletion of foreign exchange reserves by the end of the year."

A small number of experts worried that the increasing current account deficit, which was expected to reach its widest level in a decade by the end of the fiscal year, might lead the overall foreign exchange reserves to decrease more than anticipated in the future year.

The Reserve Bank of India's failure to boost interest rates as rapidly as the Federal Reserve of the United States is one reason leading to the decline.

According to a separate Reuters poll, it is now expected that the Fed will raise interest rates by an additional 150 basis points in the coming months, bringing them from near-zero in March to 3.00–3.25%.

The RBI, which only began hiking interest rates in May and has only raised the repo rate by 140 basis points, appears to be nearing completion. It is expected to grow by an additional 60 basis points during this cycle, with 50 expected this week.

According to Standard Chartered senior economist Anubhuti Sahay, the Reserve Bank of India (RBI) should reduce the rate of intervention sooner rather than later to permit the INR to trade more in line with fundamentals.

According to this remark, our foreign exchange reserves should be sufficient not only for the next six months but also for the following two to three years.