MUMBAI: India’s foreign exchange reserves, after briefly touching an all-time high of $704.9 billion, have declined for the fourth consecutive week, now settling at $684.8 billion, according to Reserve Bank of India (RBI) data.
The latest figures reveal a reduction of $3.463 billion in the week ending October 25, marking a substantial drop since the peak reached just a month ago.
The four-week decline, totaling nearly $20 billion, is likely attributed to RBI interventions aimed at stabilising the rupee amid global pressures.
Previous weekly drops include $3.7 billion, $10.7 billion, and $2.16 billion, indicating a consistent defensive stance by the central bank to temper sharp fluctuations in the rupee’s value.
Primarily foreign currency
India’s foreign reserves primarily consist of foreign currency assets, which currently stand at $593.8 billion, alongside gold reserves of $68.5 billion. These holdings act as an essential economic buffer, covering nearly a year’s worth of predicted imports and providing a safeguard against external economic shocks.
For context, India’s forex reserve growth in 2023, up approximately $58 billion, contrasts with a contraction of $71 billion in 2022.
The RBI’s market interventions – primarily through dollar sales – are part of a strategy to smooth out rupee volatility, contributing to the rupee’s transformation into one of Asia’s most stable currencies. This stability not only bolsters investor confidence but also supports India’s broader economic resilience.
Despite the current decline, India’s forex reserves remain a cornerstone of its economic strategy, underpinning trade stability and currency strength. As the global environment continues to pose challenges, RBI’s currency management policies are likely to play a key role in maintaining economic stability.
