Forex Reserves Drop (Image: ANI)
India’s foreign exchange reserves (Forex) reduced by USD 3.049 billion to USD 699.736 billion in the week ending July 4, according to the latest date from the Reserve Bank of India (RBI).
This decline follows a sharp rebound the previous week when forex had jumped by USD 4.849 billion to reach USD 702.785 billion. India’s forex reserves had hit a record high of USD 704.885 billion at September last year.
Foreign currency assets (FCA) which accounts for largest share, dropped by USD 2.629 billion to USD 591.287 billion during the week. FCA includes not just holdings in US dollars but also accounts for shifts in other major currencies like the euro, pound, and yen.
On the brighter side, gold reserves saw a gain, increasing by USD 342 million to USD 84.846 billion. Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) also climbed by USD 39 million, bringing the total to USD 18.868 billion. Additionally, India’s reserve position with the IMF rose by USD 107 million to USD 4.735 billion.
Foreign exchange reserves serve as a vital cushion, boosting market confidence, helping stabilise the rupee during external shocks, and covering the cost of imports. Analysts closely monitor these weekly RBI updates as they reveal insights into India’s external economic health and currency management strategies.
Inspite of drop, India’s forex reserves is still strong enough to cover nearly 11 months of imports and about 96% of the country’s external debt, according to the RBI. The reserves fluctuate based on RBI’s interventions in the currency markets and changes in gold holdings, reflecting a dynamic approach to maintaining economic stability.
In 2023, forex a significant rebound in its foreign exchange reserves, adding around USD 58 billion. The upward trend continued into 2024 as reserves rose by over USD 20 billion, to reach an all-time peak of USD 704.885 billion by the close of September 2024.
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