RELATIONSHIP BETWEEN INDIAN FOREX RESERVES AND RUSSIA-UKRAINE CRISIS: AN EMPIRICAL STUDY
This paper empirically investigates the relationship between the foreign exchange (Forex) reserves of India and the Russia-Ukraine crisis. To pursue this study, we have considered weekly data of Forex reserves of India and have constructed a dummy on the Russia-Ukraine crisis from January 1, 2021, to October 14, 2022, with 92 observations where January 1, 2021, to February 18, 2022, represents the time period before the crisis denoted by ‘0’ and February 25, 2022, to October 14, 2022, is considered as the time period during the crisis denoted by ‘1’. The descriptive statistics indicate the normality of the data. The Phillips-Perron (PP) unit root test further indicates the non existence of unit root within the select variables. Further, the dummy regression model indicates that there persists in a negative relationship between Forex reserves and the Russia-Ukraine crisis. Moreover, there remains a noteworthy short-run and long-run causality between Forex reserves and the Russia-Ukraine crisis. As a result, it is argued that as India is one of Russia’s and Ukraine’s main trading partners, any unrest there will undoubtedly have an influence on bilateral commerce, which will then have an impact on India’s foreign income receipts. This would cause difficulties for India’s foreign currency (Forex) reserves, as shown in this analysis. In order to lessen the effects of the crisis and put a check on the balance of payments, it is advised that India look for alternative nations trading in comparable goods and services and that sufficient steps be taken to produce those goods and services locally that are imported from Russia and Ukraine.