India’s forex reserves fall for fifth week, signaling proactive RBI measures.
India’s foreign exchange reserves dropped for the fifth consecutive week, following an all-time high last month.
The Reserve Bank of India’s (RBI) latest data showed a decrease of USD 2.675 billion in the week ending November 1, bringing the reserves to USD 682.130 billion.
This sustained drop reflects RBI’s active intervention aimed at preventing a significant depreciation of the Rupee.
According to the RBI, reserves had previously peaked at a record high of USD 704.885 billion before beginning this downward trend.
The recent decline includes previous weekly drops of USD 3.7 billion, USD 10.7 billion, USD 2.16 billion, and USD 3.463 billion, underscoring the central bank’s response to volatility in the currency market.
India’s foreign currency assets (FCA), the largest component of forex reserves, now stand at USD 589.849 billion, while gold reserves contribute USD 69.751 billion to the total.
These reserves serve as a critical buffer against global economic shocks, enhancing India’s ability to withstand fluctuations in the international economy.
Sufficient Buffer for Import Needs
India’s forex reserves, though reduced, remain adequate to cover nearly one year of projected imports.
This buffer underscores India’s economic resilience and prudent reserve management policies.
Notably, in 2023, India accumulated approximately USD 58 billion in forex reserves, offsetting the USD 71 billion decline seen in 2022.
RBI’s Strategy to Stabilize the Rupee
The RBI manages the rupee’s stability through periodic interventions, such as dollar sales, to prevent steep currency depreciation.
This practice has contributed to the Rupee’s transition from one of Asia’s most volatile currencies a decade ago to one of the region’s most stable.
This stability has bolstered investor confidence, making Indian assets more attractive on the global stage.
