India's Forex Reserves Hit Multi-Month Low Amid RBI Interventions

India's foreign exchange reserves have plunged for eight weeks, reaching USD 656.582 billion as of November 22. The decline is attributed to RBI interventions to stabilize the Rupee. Foreign exchange reserves are crucial in shielding the economy from global shocks, covering about a year's worth of imports.

India's foreign exchange reserves have tumbled for the eighth consecutive week, reaching a multi-month low of USD 656.582 billion as of November 22, according to data from the Reserve Bank of India (RBI). The latest figures reveal a drop of USD 1.310 billion over the past week, marking a continued decline since reserves peaked at USD 704.89 billion in September.

The decline in reserves is largely attributed to the RBI's interventions aimed at mitigating the depreciation of the Rupee. A robust foreign exchange reserve is essential for buffering domestic economic activities against global fluctuations. The RBI's data highlights that the foreign currency assets (FCA), constituting the largest share of forex reserves, stand at USD 566.791 billion.

Currently, India's gold reserves are valued at USD 67.573 billion. Experts estimate that the reserve levels are sufficient to cover approximately one year of projected imports. In contrast to a USD 71 billion drop in 2022, 2023 saw an addition of USD 58 billion to India's foreign exchange reserves.

Foreign exchange reserves, which are primarily held in major currencies like the US Dollar, Euro, Japanese Yen, and Pound Sterling, are crucial assets managed by a nation's central bank. The RBI vigilantly observes the foreign exchange markets, stepping in to maintain market order and curb significant volatility in the Rupee's exchange rate, without adhering to fixed target levels.

A decade ago, the Indian Rupee was among Asia's most volatile currencies. However, strategic market interventions by the RBI have transformed it into one of the region's most stable currencies. By buying dollars when the Rupee strengthens and selling during weakness, the RBI has enhanced the attractiveness of Indian assets for investors.

(With inputs from agencies.)