India's Forex Reserves Experience Significant Decline
India’s foreign exchange reserves have witnessed a notable decrease, reflecting the nation’s ongoing economic challenges. As of January 10, 2025, the reserves stood at $625.87 billion, marking a decline from the previous week’s $634.59 billion.
The Reserve Bank of India (RBI) has been actively intervening in the forex market to stabilize the rupee amidst global economic headwinds. These interventions have led to a depletion of reserves. Additionally, the rupee’s depreciation against the U.S. dollar has intensified the need for such measures.
In September 2024, India’s forex reserves reached a record high of $704.89 billion. However, since then, there has been a consistent decline, with the reserves decreasing by approximately $79 billion over a few months.
The reduction in forex reserves limits the RBI’s capacity to manage currency volatility and address external economic shocks. A diminished reserve can also affect investor confidence and India’s ability to finance its current account deficit. The central bank has indicated plans to use the remaining reserves judiciously to navigate ongoing economic challenges.
| Key Points | Details |
|---|---|
| Why in news? | India’s forex reserves declined to $625.87 billion as of January 10, 2025, down from $634.59 billion the previous week. The decline is due to RBI interventions to stabilize the rupee amid global economic challenges. |
| Highest Forex Reserves (2024) | $704.89 billion (September 2024) |
| Total Decline Since Peak | $79 billion |
| Main Reasons for Decline | RBI interventions, rupee depreciation, global economic headwinds |
| Economic Impact | Reduces RBI’s ability to manage currency volatility and finance the current account deficit |
| Regulating Authority | Reserve Bank of India (RBI) |
| India’s Current Account Deficit | Worsened due to increasing trade imbalance |
| Comparison to Previous Years | Higher than the COVID-19 lows (below $600 billion) but lower than the 2024 peak |
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