A Reuters poll found that India's already low foreign exchange reserves are likely to go down even more, reaching their lowest level in more than two years by the end of 2022 as the Reserve Bank of India continues to defend the rupee against the rise of the powerful dollar.

In an effort to stop the rupee from falling to a record low against the dollar, the RBI has cut its foreign exchange reserves by nearly $100 billion, from a peak of $642 billion a year ago to $545 billion, and more cuts are on the way.

The median prediction of 16 economists polled by Reuters on September 26 and 27 is that these reserves will drop by another $23 billion, to $523 billion, by the end of this year. That would be the lowest level in over two years if it came true.

The range of predictions was $500 billion to $540 billion.

This means that the RBI will use up its foreign exchange reserves at a rate not seen since the 2008 global financial crisis, when they dropped by more than 20%. It has already burned through its reserves at a much faster rate than when the US Federal Reserve abruptly stopped buying government bonds in 2013.

India is in a similar situation now, after about 10 years. Even though the government has sold dollars on a regular basis and said it will do so more, the rupee has lost nearly 10% of its value against the dollar this year. On Wednesday, it hit a record low of 81.95 rupees per dollar.

"Given the latest move in the rupee, I think the RBI will continue to step in, maybe not to defend a certain level of the currency but to try to reduce volatility," said Sakshi Gupta, the chief economist at HDFC Bank.

"In the coming days, there will be even more interventions to deal with the rising pressure on the rupee and the widening current account deficit. This will cause the FX reserves to drop even more by the end of the year."

A few of the economists polled said that the overall foreign exchange reserves could fall more than they expected over the next year because of a widening current account deficit, which was expected to reach its widest point in a decade by the end of the fiscal year.

Part of the reason for the decrease is that the RBI hasn't raised interest rates as fast as the US Federal Reserve has.

A separate Reuters poll showed that the Fed is likely to raise rates by 150 basis points more in the coming months. Since March, when rates were near zero, they have gone up by 300 basis points to between 3% and 3.25%.

The RBI, on the other hand, has only started raising rates since May and has only raised the repo rate by 140 basis points. It looks like they are almost done. It is expected to go up by another 50 basis points this week, for a total of 60 basis points.

"The RBI should slow down its interventions as soon as possible," said Anubhuti Sahay, a senior economist at Standard Chartered. "This would let the INR trade more in line with its real value."

"We should have enough foreign exchange reserves not just for the next six months, but also for the next two to three years."

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