India’s foreign exchange reserves have experienced a notable decline, dropping by $7.511 billion to $681.384 billion for the week ending May 22, as the Reserve Bank of India actively intervened in the forex market amidst rupee pressure and the ongoing Middle East conflict.
Illustration: Dado Ruvic/Reuters
Key Points
- India’s forex reserves decreased by $7.511 billion to $681.384 billion for the week ended May 22.
- This decline follows a previous drop of $8.094 billion, indicating a sustained downward trend.
- The Middle East conflict and subsequent pressure on the rupee led to RBI intervention through dollar sales, contributing to the reduction in reserves.
- Foreign currency assets, a major component, fell by $2.872 billion, while gold reserves declined by $4.53 billion.
- Prime Minister Narendra Modi has urged citizens to conserve forex by limiting foreign travel, fuel use, and gold purchases.
India’s forex reserves dropped $7.511 billion to $681.384 billion during the week ended May 22, the RBI said on Friday.
In the previous reporting week, the kitty had dropped $8.094 billion to $688.894 billion.
Impact of Global Events on Reserves
The kitty had expanded to an all-time high of $728.494 billion during the week ended February 27 this year before the onset of the Middle East conflict that 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 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 22, foreign currency assets, a major component of the reserves, decreased $2.872 billion to $543.032 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 foreign exchange reserves.
The value of gold reserves also declined $4.53 billion to $114.786 billion during the week, the RBI said.
The Special Drawing Rights (SDRs) were down by $77 million to $18.748 billion, the apex bank said.
India’s reserve position with the IMF was also down by $33 million to $4.818 billion at the end of the reporting week, according to the RBI data. PTI AA TRB
