India’s foreign exchange reserves, which had been steadily increasing over the past few weeks, experienced a decline of $6.1 billion in the week ending on May 19, 2023. This pullback comes after three consecutive weekly increases and affects all components of the reserves, with foreign currency assets (FCA) being impacted the most, according to the latest data from the Reserve Bank of India (RBI).
Forex Reserves Fall to $593.48 Billion
India’s total forex reserves reached $593.48 billion during the week ending on May 19, 2023, representing a decrease of $6.052 billion from the previous week. In the previous week, reserves had increased by $3.553 billion, bringing them close to the $600 billion mark at $599.53 billion. Before that, the reserves had surged by $7.196 billion. Notably, in the first week of May, reserves had jumped by $4.532 billion.
Foreign Currency Assets (FCA) Witness a Significant Decline
During the latest week (May 19, 2023), the largest component of India’s forex reserves, foreign currency assets (FCA), experienced a dip of $4.654 billion, bringing the total FCA to $524.945 billion. In the previous week, FCA had surged by $3.577 billion, indicating a substantial reversal in trend.
Gold Reserves and Other Components
In addition to FCA, other components of India’s forex reserves also saw a decline. Gold reserves plunged by $1.227 billion to $45.127 billion, while Special Drawing Rights (SDRs) contracted by $137 million to $18.276 billion. Furthermore, the reserve position in the International Monetary Fund (IMF) slipped by $35 million to $5.130 billion.
Comparison to Previous Reserve Levels
It is worth noting that India’s forex reserves had reached an all-time high of $645 billion in October 2021, showcasing the country’s strong accumulation of foreign assets. However, as of March 31, 2023, the reserves had decreased to $578.4 billion, highlighting the fluctuating nature of forex reserves.
RBI’s Intervention to Stabilize the Rupee
To cushion against rupee depreciation, the Reserve Bank of India (RBI) has been actively intervening in the forex market through both spot and forward positions. This intervention aims to stabilize the value of the rupee and maintain overall economic stability in the country.