Government Clarifies Misconceptions About Decline in India's Forex Reserves

The Indian government clarified that the recent dip in foreign exchange reserves is not unprecedented, attributing it to external and domestic factors. The decline was 2.63% in mid-November 2024, different from the significant drop of 5.65% during the 2008 crisis. The rupee's value remains market-driven.

The government on Monday refuted claims that the recent fall in India's foreign exchange reserves marked the most significant decline in the country's history. Responding in the Lok Sabha, Minister of State for Finance, Pankaj Chaudhary, revealed that the reserves slid by 2.63% in the week concluding on November 15, 2024, compared to the preceding week.

Amidst the scrutiny, the Minister emphasized that this reduction is not the steepest in percentage terms over the past 20 years. The most substantial drop occurred in late October 2008, with a 5.65% decline amid the global financial crisis. Chaudhary clarified, 'For the week ended November 15, 2024, the Foreign Exchange Reserves (FER) decreased by 2.63% compared to the previous week.'

India's forex reserves and currency face pressures from a mix of external and internal factors, including capital outflows, fluctuations in the dollar index, climbing global interest rates, and crude oil price hikes. The government stressed that the rupee's value is decided by market forces, influenced by various elements like capital flows and the current account deficit.

The Minister affirmed, 'The Indian Rupee (INR) is market-determined, without a fixed target or band.' The Reserve Bank of India (RBI) actively participates in the forex market when needed to stabilize the rupee. The government assured the situation is under control, with mechanisms ready to mitigate financial instability.

(With inputs from agencies.)