The Country's Foreign Exchange Reserves At The Lowest Level Of Two Years

On October 21, India's foreign exchange reserves fell to $ 524.520 billion, a two-year low. Compared to the previous week, there was a $3.85 billion decline in foreign exchange reserves. The foreign exchange reserves were $528.367 billion as of the previous week, which concluded on October 14, according to RBI data. Let us remind you that India had approximately $ 577.00 billion in foreign exchange reserves two years ago.

The main component of foreign exchange reserves, foreign currency assets, decreased by $3.59 billion to USD 465.075 billion, according to the most recent RBI data.

The country's gold reserves declined by $247 million to reach $37.206 billion during this period. However, RBI data shows that the value of India's Special Drawing Rights (SDR) with the International Monetary Fund rose by $7 million to $17.440 billion during the week under review.

The forex reserves have been showing a decline in the past few months as the RBI intervenes in the market possibly to arrest the rupee's depreciation against the rising US dollar. On the other hand, the rising cost of imported goods has also necessitated the higher requirement of foreign exchange reserves for trade settlement, thereby reducing it.

Usually, RBI intervenes in the market through liquidity management, including selling the dollar, to prevent a steep fall in the rupee. India's foreign exchange reserves had fallen by nearly USD 100 billion since Russia invaded Ukraine in late February. This was due to the costly imports of energy and other commodities globally. During the last 12 months, there has been a decline in foreign exchange reserves by about US$ 115 billion on a cumulative basis.