India’s forex reserves slumped in the week that ended on February 14, reversing the gains it had extended in the past three weeks. In the week that ended on February 14, the forex reserves declined by $2.54 billion to $635.721 billion.
The forex reserves had slumped for about four months, hitting an about 11-month low. Then followed the latest rollercoaster movement. The forex reserves started falling since they touched an all-time high of USD 704.89 billion in September. They are now about 10% lower from its peak.
The decline in reserves is most likely due to RBI intervention, aimed at preventing a sharp depreciation of the Rupee. The Indian Rupee is now at or near its all-time low against the US dollar. The latest RBI data showed that India’s foreign currency assets (FCA), the largest component of forex reserves, stood at USD 539.591 billion.
Gold reserves currently amount to USD 74.150 billion, according to RBI data. Estimates suggest that India’s foreign exchange reserves are sufficient to cover approximately 10–11 months of projected imports.
In 2023, India added around USD 58 billion to its reserves, “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.
