India’s foreign exchange reserves have decreased for the third week in a row.

India’s foreign exchange reserves have seen a decline for the third week in a row, after reaching an all-time high of $648.562 billion. According to the Reserve Bank of India (RBI), the country’s forex kitty decreased by USD 2.412 billion to USD 637.922 billion in the April 26 week. The biggest component of the forex reserves, foreign currency assets (FCA), fell by USD 1.159 billion to USD 559.701 billion, while gold reserves dropped by USD 1.275 billion to USD 55.533 billion.
India’s forex reserves are sufficient to cover 11 months of projected imports, as per the Monthly Economic Review report of the Department of Economic Affairs under the Ministry of Finance. In 2023, the RBI added around USD 58 billion to its foreign exchange kitty, following a cumulative decline of USD 71 billion in 2022. So far in 2024, foreign exchange reserves have risen by approximately USD 18 billion.
Foreign exchange reserves are assets held by a nation’s central bank or monetary authority, primarily in reserve currencies such as the US Dollar, Euro, Japanese Yen, and Pound Sterling. The RBI has been intervening in the forex market to prevent steep depreciation in the rupee against a surging US dollar. This intervention aims to maintain orderly market conditions and contain excessive volatility in the exchange rate, without a predetermined target level or band being referred to.
The last time India’s forex reserves touched an all-time high was in October 2021. The subsequent decline can be attributed to a rise in the cost of imported goods in 2022. The RBI’s interventions in the forex market contribute to the fluctuation in foreign exchange reserves, as the apex bank sells dollars to prevent sharp rupee depreciation. Overall, the RBI closely monitors the foreign exchange markets to ensure stability and prevent turbulent conditions.