India’s Forex Reserves Decline to $607.03 Billion Amid Global Economic Challenges

Global, 29th July 2023: India’s foreign exchange reserves saw a decline of $1.9 billion, reaching $607.03 billion in the week ended June 21, as reported by the Reserve Bank of India (RBI). The previous week had recorded a significant increase of $12.743 billion, surpassing the $600 billion mark.

Previously, in October 2021, India’s forex reserves had reached an all-time high of $645 billion. However, the reserves have gradually declined since then as the central bank utilizes the funds to defend the value of the Indian rupee, especially in response to global developments impacting the currency. For instance, during the week ended January 13, the overall forex kitty had expanded by $10.417 billion.

In the latest reporting week that ended on July 21, foreign currency assets, a major portion of the reserves, witnessed a decrease of $2.41 billion, settling at $537.75 billion. These foreign currency assets are expressed in dollar terms and consider the impact of non-US currency appreciation or depreciation, such as the euro, pound, and yen, held within the forex reserves.

On the other hand, gold reserves increased by $417 million, reaching $45.61 billion, while special drawing rights (SDRs) experienced a decline of $11 million, standing at $18.47 billion.

India’s reserve position with the International Monetary Fund (IMF) rose by $21 million to $5.2 billion in the same reporting week, as per the RBI’s data.

The rupee’s recent fluctuations also affected the forex market, with the rupee depreciating by 26 paise against the US dollar, closing at 82.18 on Friday. Foreign fund outflows and negative trends in domestic equity markets contributed to the rupee’s depreciation, along with rising crude oil prices nearing $84 a barrel. In contrast, the US dollar gained strength due to better-than-expected macroeconomic data from the United States, noted by forex traders.

Managing forex reserves remains crucial for India to maintain currency stability and ensure sufficient funds for international obligations and external economic challenges. The RBI continues to closely monitor the forex reserves as the global economic landscape evolves, aiming to mitigate any adverse impacts on the Indian economy.