India’s foreign exchange reserves (forex) dipped USD 4.888 billion to end at USD 685.729 billion in the week ending May 16, official data released by the Reserve Bank of India (RBI) showed.
Recent weeks had witnessed a boom in the country’s forex reserves gains as they touched USD 690 bn after a consistent four-month slump.
The RBI data also showed that India’s foreign currency assets (FCA), the largest component of foreign exchange reserves, now stood at USD 581.652 billion.
However, estimates suggest that the country’s foreign exchange reserves, despite this past week’s drop, are sufficient to cover approximately 10-12 months of projected imports. Even with this weekly loss, India’s forex kitty is quite close to its all-time high of USD 704.89 billion that was reached in September 2024.
The gold reserves currently amount to USD 81.217 billion, says RBI’s data. It fell by a whopping USD 5.121 billion in the latest week.
Central banks worldwide are increasingly accumulating safe-haven gold in their foreign exchange reserves kitty, and India is no exception. The share of gold maintained by the RBI in its foreign exchange reserves has almost doubled since 2021.
In 2023, India added around USD 58 billion to its foreign exchange reserves, contrasting with a cumulative decline of USD 71 billion in 2022.
In 2024, the reserves rose by a little over USD 20 billion.
Foreign exchange reserves, or FX reserves, are assets held by a nation’s central bank or monetary authority, primarily in reserve currencies such as the US Dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling.
The RBI often intervenes by managing liquidity, including selling dollars, to prevent steep rupee depreciation. The RBI strategically buys dollars when the rupee is strong and sells when it weakens.
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