India Could Need $60 Billion Additional Reserves: HSBC

To counter the challenges from key vulnerabilities such as unhedged external commercial debt, short term external debt and portfolio outflows, India needs an additional $60 billion of reserves, which would take the overall holdings to $420 billion, notes HSBC.

Pranjul Bhandari and Prithviraj Srinivas of HSBC in their June 26, 2015 research note titled: “How much is too much? point out that India’s main vulnerability has gradually transitioned from trade imbalance to indebtedness.

India’s three recent episodes of turmoil

Bhandari and Srinivas start off with a note that traditional metrics and benchmarks indicate India has adequate reserves. With its current reserves of about $360 billion, India boasts of an import cover which is three times as large as the IMF’s recommended value...