New Delhi: India’s foreign exchange reserves have been on a continuous decline for nearly four months, with a drop recorded in 15 of the past 16 weeks, reaching their lowest level in 11 months.
According to the latest data released by the Reserve Bank of India (RBI), the forex reserves fell by USD 1.88 billion to USD 623.983 billion in the week ending January 17. The reserves, which had peaked at an all-time high of USD 704.89 billion in September, have now declined by over 10 percent from their record level.
Experts suggest that the decline is primarily due to the RBI’s intervention in the currency markets to stabilize the Indian Rupee, which is currently trading near its all-time low against the US Dollar.
Breaking down the reserves, the RBI data shows that India’s foreign currency assets (FCA), which form the largest portion of the forex reserves, are currently at USD 533.133 billion. Meanwhile, gold reserves have seen an increase of USD 1.06 billion in the past week, bringing the total to USD 68.947 billion.
It is estimated that India’s current reserves are adequate to cover roughly one year of projected imports.
In 2023, India added approximately USD 58 billion to its reserves, contrasting with the previous year’s decline of USD 71 billion. In 2024, reserves had increased by over USD 20 billion before the recent slump.
Foreign exchange reserves, commonly known as FX reserves, are assets held by the central bank in foreign currencies, primarily in US Dollars, with smaller holdings in Euros, Japanese Yen, and British Pounds.
The RBI maintains a close watch on the forex market, intervening selectively to ensure market stability and prevent excessive volatility in the Rupee’s value, rather than targeting a specific exchange rate.
Through strategic interventions, including the sale of US Dollars, the RBI aims to manage liquidity and curb sharp currency depreciation. When the Rupee strengthens, the central bank purchases dollars to build reserves, thus enhancing investor confidence in Indian assets.
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