India's Forex Reserves Slip By $1.713 Billion Amid Market Volatility

India's foreign exchange reserves dropped by USD 1.713 billion to USD 651.997 billion, as per RBI data. The current reserves are slightly below the all-time high of USD 655.817 billion. Rising costs of imports and market interventions by RBI contributed to this decline.

India's foreign exchange reserves fell by USD 1.713 billion, settling at USD 651.997 billion for the week ending June 28, according to official data released by the Reserve Bank of India (RBI) on Friday. This is a slight dip from the all-time high of USD 655.817 billion recorded recently.

The reserves have fluctuated over time, cumulatively increasing by about USD 30 billion in 2024. Latest figures from the RBI reveal that foreign currency assets (FCA), which make up the majority of the forex reserves, decreased by USD 1.252 billion to USD 572.881 billion.

Additionally, gold reserves declined by USD 427 million to USD 56.528 billion during the same period. The reserves can now cover approximately 11 months of projected imports, says a recent RBI report.

In 2023, the RBI bolstered its forex reserves by adding around USD 58 billion, a stark contrast to the USD 71 billion decline witnessed in 2022. Forex reserves constitute assets held by the central bank, largely in reserve currencies such as the US Dollar, Euro, Japanese Yen, and Pound Sterling.

The forex reserves had previously reached their historical peak in October 2021. The subsequent decline has been largely attributed to higher import costs in 2022. The relative fall in reserves is also linked to periodic RBI interventions aimed at stabilizing the Indian Rupee against the rising US dollar.

RBI's market interventions, including dollar sales, seek to prevent sharp depreciations in the rupee. The central bank strives to maintain market stability, intervening only to limit excessive volatility, without targeting specific exchange rate levels.

(Disclaimer: With inputs from agencies.)