India’s Forex Reserves: This decline follows a significant increase of $4.307 billion in the previous reporting week, which pushed the reserves to a record high of $655.817 billion after several consecutive weeks of gains
After hitting all-time high levels following continuous gains, India’s foreign exchange (forex) reserves fell $2.922 billion to $652.895 billion during the week ended June 14, according to the latest data from the Reserve Bank of India (RBI).
This decline follows a significant increase of $4.307 billion in the previous reporting week, which pushed the reserves to a record high of $655.817 billion after several consecutive weeks of gains.
Breakdown of Reserves
The decrease in forex reserves was primarily driven by a reduction in foreign currency assets, which are a major component of the reserves. These assets fell by $2.097 billion, bringing the total to $574.24 billion. The value of these assets, expressed in dollar terms, is influenced by the appreciation or depreciation of non-US currencies like the euro, pound, and yen held in the reserves.
Gold reserves also saw a decrease, dropping by $1.015 billion to $55.967 billion during the week. Meanwhile, the special drawing rights (SDRs) were down by $54 million, amounting to $18.107 billion. In contrast, India’s reserve position with the International Monetary Fund (IMF) increased by $245 million, reaching $4.581 billion.
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Expert Insights
Sanjeev Agrawal, President of the PHD Chamber of Commerce and Industry, commented on the current state of India’s forex reserves: “Amidst geopolitical challenges and an uncertain global economic environment, India’s foreign currency reserves remain robust at more than $652 billion. This resilience is supported by a high economic growth trajectory, strong exports, attractiveness towards global investors, and a robust capital market.”
Amit Goel, co-founder and chief global strategist at Pace 360, provided additional context: “India’s foreign exchange reserves fell after reaching a record high in the previous week as the central bank sold dollars to cushion the rupee’s drop. The stockpile decreased by $2.9 billion to $652.90 billion, from a record high of $655.8 billion the previous week. This marks the first decline in three weeks.”
He further explained, “The central bank has been using its reserves to check volatility in the currency. The rupee is among the best-performing Asian currencies so far this year, even after hitting an all-time low on Thursday. The drop in reserves occurred despite overseas investors boosting their holdings of Indian stocks and bonds ahead of the nation’s entry into a key global bond index. The monetary authority will continue to build reserves ‘opportunistically’ as they help prevent volatility in the market.”
