India’s foreign exchange reserves witnessed a decline of $4.9 billion, falling to $593.90 billion for the week ending September 8, as reported by the Reserve Bank of India (RBI). This comes after a notable increase of $4.039 billion in the previous reporting week when the reserves stood at $598.897 billion.
Factors Contributing to the Decline The decline in forex reserves can be attributed to the central bank’s utilization of reserves to safeguard the rupee, particularly in response to global developments that have exerted pressure on the currency since the previous year. While the country’s forex reserves had reached a historic high of $645 billion in October 2021, subsequent factors have impacted this reserve position.
Composition of Reserves The major component of India’s forex reserves, foreign currency assets, decreased by $4.265 billion during the week, settling at $526.426 billion. Foreign currency assets are influenced by fluctuations in the values of non-US units, including the euro, pound, and yen, held within the foreign exchange reserves.
Gold reserves also witnessed a decline, falling by $554 million to reach $44.384 billion. Additionally, the special drawing rights (SDRs) registered a decrease of $134 million, with SDRs now standing at $18.06 billion.
Reserve Position with IMF India’s reserve position with the International Monetary Fund (IMF) also experienced a decrease, dropping by $39 million to reach $5.034 billion in the reporting week, as indicated by RBI data.
The fluctuation in India’s forex reserves reflects the dynamic nature of its economic and monetary policies, responding to various domestic and global factors that influence the country’s external financial position.
