Ayush Kumar Jaiswal
India’s foreign exchange reserves have been on a downward trajectory for the past four months, continuing their decline for 15 out of the last 16 weeks and hitting an 11-month low. As of the week ending January 17, India’s forex reserves dropped by USD 1.88 billion, bringing the total to USD 623.983 billion, according to the latest data from the Reserve Bank of India (RBI).
The reserves have been falling since they reached a record high of USD 704.89 billion in September, now more than 10 percent lower than that peak. This decline is largely attributed to RBI interventions aimed at preventing a sharp depreciation of the Indian Rupee, which is currently at or near its all-time low against the US dollar.
The RBI’s data revealed that India’s foreign currency assets (FCA), which constitute the largest share of forex reserves, stood at USD 533.133 billion. Meanwhile, gold reserves amounted to USD 68.947 billion, marking a USD 1.06 billion increase in the past week.
Despite the recent declines, estimates suggest India’s forex reserves are still sufficient to cover about a year’s worth of projected imports. In 2023, India added around USD 58 billion to its reserves, following a decline of USD 71 billion in 2022. In 2024, reserves rose by just over USD 20 billion, though they would have been higher without the latest drop.
Foreign exchange reserves are assets held by a nation’s central bank, primarily in reserve currencies like the US Dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling. The RBI actively monitors the foreign exchange market, intervening to ensure stability and curb excessive volatility in the Rupee’s exchange rate, without adhering to a fixed target.
The RBI’s intervention often involves managing liquidity, including selling dollars to prevent sharp depreciation of the Rupee, or buying dollars when the Rupee is strong, in an effort to maintain market stability and attract investment into Indian assets
