India’s foreign exchange reserves experienced a notable decline of USD 5.240 billion, settling at USD 617.230 billion in the week ending on February 9, according to the latest data released by the Reserve Bank of India (RBI). This decrease follows a recent surge that saw the reserves reach a one-month high in the preceding week.
During the same week, India’s foreign currency assets (FCA), the largest component of the forex reserves, reported a decline of USD 4.807 billion, reaching USD 546.524 billion, as per the central bank’s weekly statistical data. The gold reserves also experienced a dip, decreasing by USD 350 million to USD 47.739 billion.
In the calendar year 2023, the RBI contributed approximately USD 58 billion to the foreign exchange reserves, countering the cumulative slump of USD 71 billion witnessed in 2022.
Forex reserves, or foreign exchange reserves, are assets held by a nation’s central bank or monetary authority, typically in reserve currencies such as the US Dollar, Euro, Japanese Yen, and Pound Sterling.
India’s foreign exchange reserves had reached an all-time high of approximately USD 645 billion in October 2021. The subsequent decline, while marginal on a cumulative basis, can be attributed to increased costs of imported goods in 2022. Additionally, the relative fall in forex reserves may be associated with the RBI’s periodic intervention in the market to counter the uneven depreciation of the rupee against the strengthening US dollar.
The RBI engages in market interventions, including the selling of dollars, to prevent a steep depreciation in the rupee. These interventions are part of the central bank’s broader efforts to maintain orderly market conditions and curb excessive volatility in the exchange rate, without adhering to any predetermined target level or band.
