India's Forex Reserves Decline: Not the Steepest Drop, Says Finance Minister

India's forex reserves saw a 2.63% decline for the week ending November 15, 2024. Despite drawing attention, the drop isn't the steepest in the past two decades. External and domestic factors, such as capital flows and crude oil prices, pressure the Indian Rupee. The RBI intervenes to manage volatility.


Devdiscourse News Desk | Updated: 16-12-2024 17:45 IST | Created: 16-12-2024 17:45 IST
India's Forex Reserves Decline: Not the Steepest Drop, Says Finance Minister
Minister of State for Finance, Pankaj Chaudhary (File Photo/ Sansad TV). Image Credit: ANI
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The government has clarified that the recent decline in India's foreign exchange reserves is not the largest in history. On Monday, Minister of State for Finance, Pankaj Chaudhary, informed the Lok Sabha that the reserves dipped by 2.63% in the week ending November 15, 2024, compared to the previous week.

Drawing comparisons with historical data, the Minister pointed out that the current drop is far from being the steepest in percentage terms over the past two decades. The sharpest decline occurred in the week ending October 24, 2008, when reserves plunged by 5.65% amid the global financial crisis. Chaudhary stated, 'For the week ended November 15, 2024, the foreign exchange reserves decreased by 2.63% vis-a-vis the previous week. However, the sharpest fall recorded in the past 20 years was 5.65% in October 2008.'

The pressure on India's forex reserves and the Indian Rupee is attributed to both external and domestic influences, such as capital outflows, shifts in the dollar index, rising global interest rates, and climbing crude oil prices. These elements combine to create a challenging scenario for the Indian currency.

Highlighting the dynamics of the Indian Rupee, the government underscored that the currency's value is determined by market forces without any fixed target or band. Multiple factors, including capital flows, the dollar index, interest rates, crude oil prices, and the current account deficit, play roles in this valuation.

The Minister emphasized, 'The value of the Indian Rupee is market-determined, with no target or specific level or band.' The Reserve Bank of India (RBI) remains vigilant, intervening in the forex market to curb excessive volatility when necessary.

The government's message seeks to reassure the public, indicating that current mechanisms, including the RBI, are equipped to handle undue fluctuations and maintain financial stability. (ANI)

(With inputs from agencies.)

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