India’s foreign exchange reserves fell by $3.06 billion to $696.67 billion in the week ended July 11, according to official data released by the Reserve Bank of India (RBI). This mark a second consecutive week of decline. In the previous week on July 4, the country’s foreign exchange reserves had declined by USD 3.049 billion to USD 699.736 billion.
Foreign currency assets, a major component of the forex reserves, declined by USD 2.477 billion to USD 588.81 billion in the week ended July 11, which is possibly the main reason for the fall in forex reserves.
Gold reserves, another major component of foreign exchange, also fell sharply by USD 498 million to USD 84.348 billion.
The country’s Special Drawing Rights (SDRs) with the global financial body, the International Monetary Fund (IMF), declined by USD 66 million to USD 18.802 billion during the week under review ended July 11, according to Reserve Bank of India data. 6 million to USD 18.802 billion during the reporting week of July 11, according to the RBI data. The Reserve Position in the IMF also decreased by USD 24 million, the data added.
Central banks around the world are increasingly accumulating safe-haven gold in their foreign exchange reserves, and India is no exception. The share of gold held by the Reserve Bank of India (RBI) in its foreign exchange reserves has almost doubled since 2021.
In 2023, India added about USD 58 billion to its foreign exchange reserves, compared to a cumulative drop of USD 71 billion in 2022. In 2024, the reserves grew by a little over USD 20 billion, and touched an all-time high of USD 704.885 billion at the end of September 2024.
India’s foreign exchange reserves (forex) are enough to meet 11 months of imports and about 96 per cent of the country’s external debt, Governor Sanjay Malhotra said while announcing the decisions of the Monetary Policy Committee (MPC).
The RBI Governor expressed confidence that India’s external sector is resilient and key external sector vulnerability indicators are improving.
Foreign exchange reserves, or FX reserves, are assets held by a country’s central bank or monetary authority, primarily in reserve currencies such as the US dollar, with smaller portions in the euro, Japanese yen and pound sterling.
To prevent a sharp fall in the rupee, the RBI often intervenes through liquidity management, including selling dollars. The RBI strategically buys dollars when the rupee is strong and sells it when it is weak.
With the inputs of ANI