India's Forex Reserves Dip by USD 1.713 Billion, Still Near Record Highs

India's foreign exchange reserves fell by USD 1.713 billion to USD 651.997 billion, according to the Reserve Bank of India. Despite the dip, they remain close to their all-time highs. The drop includes declines in foreign currency assets and gold reserves. Current reserves cover 11 months of imports.

India's foreign exchange reserves saw a decline of USD 1.713 billion, bringing the total to USD 651.997 billion for the week ending June 28, as per official data from the Reserve Bank of India (RBI) released on Friday. Despite this drop, the reserves remain just below their all-time peak of USD 655.817 billion reached recently. Notably, India had reached a new lifetime high in forex reserves in the week ending June 7.

The fluctuation in reserves has been ongoing. In total for 2024, the reserves have seen an approximate increase of USD 30 billion. The RBI's latest data indicates a decline in foreign currency assets (FCA), the prime component of forex reserves, by USD 1.252 billion to USD 572.881 billion.

Additionally, gold reserves fell by USD 427 million, settling at USD 56.528 billion. Currently, India's forex reserves are adequate to cover nearly 11 months of projected imports, according to an RBI report.

Throughout 2023, the RBI bolstered its forex reserves by adding about USD 58 billion. This followed a significant cumulative slump of USD 71 billion in 2022. Forex reserves, held by a nation's central bank, are essential assets typically kept in major reserve currencies like the US Dollar, Euro, Japanese Yen, and Pound Sterling.

The last record high for India's forex reserves was in October 2021. The subsequent decline was mainly due to a surge in the cost of imported goods in 2022 and the RBI's periodic interventions to stabilize the rupee against a rising US dollar.

The RBI frequently intervenes in the forex market through liquidity management, including dollar sales, to curb sharp depreciation in the rupee. These actions aim to maintain orderly market conditions and control excessive volatility in the exchange rate, without targeting any specific level or band.

(Disclaimer: With inputs from agencies.)