New Delhi: India’s foreign exchange reserves declined by USD 1.713 billion to USD 651.997 billion during the week that ended June 28, official data from the Reserve Bank of India (RBI) showed on Friday. The reserves are currently a tad lower than their all-time highs of USD 655.817 touched recently.
India’s foreign exchange reserves jumped to touch a new lifetime high during the week that ended June 7. The reserves have been rising on and off for a long time now. So far in 2024, they have risen about USD 30 billion, on a cumulative basis.
According to the latest data released by the Reserve Bank of India (RBI), India’s foreign currency assets (FCA), the biggest component of the forex reserves, declined by USD 1.252 billion to USD 572.881 billion. Gold reserves during the week declined by USD 427 million to USD 56.528 billion.
India’s foreign exchange reserves are now sufficient to cover around 11 months of projected imports, according to a recent RBI report. In the calendar year 2023, the RBI added about USD 58 billion to its foreign exchange kitty. In 2022, India’s forex kitty slumped by USD 71 billion cumulatively.
Forex reserves, or foreign exchange reserves (FX reserves), are assets that are held by a nation’s central bank or monetary authority. It is generally held in reserve currencies, usually the US Dollar and, to a lesser degree, the Euro, Japanese Yen, and Pound Sterling.
The country’s foreign exchange reserves last touched their all-time high in October 2021. Much of the decline after that can be attributed to a rise in the cost of imported goods in 2022. Also, the relative fall in forex reserves could be linked to the RBI’s intervention, from time to time, in the market to defend the uneven depreciation in the rupee against a surging US dollar.
Typically, the RBI, from time to time, intervenes in the market through liquidity management, including through the sale of dollars, to prevent a steep depreciation in the rupee.