February 18, 2024
India's Foreign Exchange Reserves Decline to USD 617.303 Billion
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India’s Foreign Exchange Reserves Decline to USD 617.303 Billion

India’s Foreign Exchange Reserves Decline to USD 617.303 Billion

India’s Foreign Exchange Reserves Decline to USD 617.303 Billion

India’s foreign exchange reserves witnessed a decrease of USD 5.898 billion, reaching USD 617.303 billion in the week ending January 5, 2023, according to data released by the Reserve Bank of India (RBI). The decline is primarily attributed to a decrease in foreign currency assets (FCA), the largest component of the reserves, which fell from USD 4.966 billion to USD 546.650 billion during the week.

Gold reserves also saw a decline, dropping by USD 839 million to USD 47.489 billion. In the calendar year 2023, the RBI added approximately USD 58 billion to the foreign exchange reserves. However, in 2022, India’s forex reserves experienced a cumulative decline of USD 71 billion.

Foreign exchange reserves are assets held by a nation’s central bank and are generally held in reserve currencies, including the US Dollar, Euro, Japanese Yen, and Pound Sterling. The all-time high of about USD 645 billion was reached in October 2021, with the marginal decline since then attributed to factors such as increased import costs in 2022.

The relative fall in forex reserves is also linked to the RBI’s periodic intervention in the market to defend against the rupee’s depreciation against a strengthening US dollar. The RBI intervenes to maintain orderly market conditions, preventing excessive volatility in the exchange rate without adhering to a pre-determined target level or band.

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