New Delhi, December 1: India’s foreign exchange (forex) reserves have declined for the eighth consecutive week, reaching a multi-month low of $656.582 billion as of November 22, according to the Reserve Bank of India (RBI). This marks a drop of approximately $1.310 billion in the latest reporting week.
The reserves, which had reached an all-time high of $704.89 billion in September, have been consistently falling, likely due to the RBI’s interventions to curb sharp depreciation of the Rupee. Forex reserves play a critical role in shielding the domestic economy from global shocks.
Key Highlights:
- Forex Reserve Composition:
- Foreign Currency Assets (FCA): The largest component of the reserves, currently at $566.791 billion.
- Gold Reserves: Valued at $67.573 billion, according to RBI data.
- Import Cover:
The current reserves are sufficient to cover approximately one year of projected imports, reflecting a stable but cautious economic position. - Annual Trends:
- In 2023, India added $58 billion to its forex reserves.
- This contrasts with 2022, when reserves saw a cumulative decline of $71 billion.
- RBI’s Role:
The RBI actively monitors forex markets, intervening to maintain stability and prevent excessive volatility in the Rupee exchange rate. The central bank strategically buys dollars during periods of Rupee strength and sells during weakness, ensuring stability and bolstering investor confidence in Indian assets.
Historical Context:
A decade ago, the Indian Rupee was among the most volatile currencies in Asia. Today, it ranks among the most stable, thanks to the RBI’s proactive management.