India's foreign exchange reserves experienced a slight decline of just over USD 2 billion in the week ending on May 24, stepping back from the record high achieved a week earlier.
The current reserves stand at USD 646.673 billion, following a three-week consecutive increase in the previous period, reaching a new peak. Prior to this upward trend, there had been three consecutive weeks of decline in the forex kitty.
According to recent data from the Reserve Bank of India (RBI), the country's foreign currency assets (FCA), the largest component of the forex reserves, decreased by USD 1.510 billion to USD 567.499 billion during the week.
Additionally, gold reserves dropped by USD 482 million to USD 56.713 billion. India's foreign exchange reserves are now sufficient to cover approximately 11 months of projected imports, as indicated by an RBI report.
In the calendar year 2023, the RBI bolstered its foreign exchange reserves by approximately USD 58 billion, while in 2022, the forex kitty experienced a cumulative decline of USD 71 billion. In 2024, foreign exchange reserves have seen a cumulative increase of about USD 28 billion so far.
Forex reserves, also known as foreign exchange reserves (FX 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.
The last time India's foreign exchange reserves reached their all-time high was in October 2021, with subsequent declines partly attributed to rising import costs in 2022. The decline in forex reserves may also be attributed to the RBI's occasional market intervention to mitigate uneven depreciation of the rupee against a strengthening US dollar.
The RBI monitors foreign exchange markets closely and intervenes as needed to maintain orderly market conditions and curb excessive exchange rate volatility, without adhering to predetermined target levels or bands.
