India’s foreign exchange reserves experienced a notable decline of $8.094 billion, reaching $688.894 billion for the week ended May 15, influenced by the Reserve Bank of India’s market interventions and the ongoing Middle East conflict.
Illustration: Dado Ruvic/Reuters
Key Points
- India’s forex reserves decreased by $8.094 billion to $688.894 billion in the week ending May 15.
- This decline follows a period where reserves reached an all-time high of $728.494 billion in February, before the Middle East conflict.
- The Reserve Bank of India (RBI) intervened in the forex market through dollar sales, contributing to the drop in reserves.
- Foreign currency assets, a major component, fell by $6.483 billion, while gold reserves also decreased by $1.536 billion.
- Prime Minister Narendra Modi has urged citizens to conserve forex by reducing foreign travel, fuel use, and gold purchases.
India’s forex reserves dropped $8.094 billion to $688.89 billion during the week ended May 15, the Reserve Bank of India (RBI) said on Friday.
The overall reserves had jumped by $6.29 billion to $696.99 billion during the week ended May 8.
Impact of Global Events on Reserves
The kitty had expanded to an all-time high of $728.49 billion during the week ended February 27 this year before the onset of the Middle East conflict which led to several weeks of a drop as the rupee came under pressure and the RBI had to intervene in the forex market through dollar sales.
Prime Minister Narendra Modi has also made multiple public appeals starting May 11 to countrymen to conserve forex by cutting down on foreign travel, limiting fuel use and refraining from gold buys for a year.
Components of the Decline
For the week ended May 15, foreign currency assets, a major component of the reserves, decreased by $6.48 billion to $545.90 billion, the central bank’s data showed.
Expressed in dollar terms, the foreign currency assets include effects of appreciation or depreciation of non-US units, such as the euro, pound, and yen, held in the foreign exchange reserves.
Value of gold reserves also declined $1.54 billion to $119.32 billion during the week, the RBI said.
The special drawing rights (SDRs) were down by $49 million to $18.82 billion, the apex bank said.
India’s reserve position with the IMF was also down by $25 million to $4.85 billion at the end of the reporting week, according to the apex bank’s data.
