India's Forex Reserves Hit Multi-Month Low Amidst Market Volatility

India's forex reserves dropped by $1.988 billion, standing at $652.869 billion, as of December 13. This marks a downward trend in ten of the past 11 weeks following RBI interventions to stabilize the Rupee. Current reserves cover a year of imports, with foreign currency assets at $562.576 billion.

India's foreign exchange reserves continued their downward trajectory, declining by $1.988 billion to $652.869 billion for the week ending December 13, according to the Reserve Bank of India (RBI). This decline marks a persistent, ten-week slump over the past 11 weeks, bringing forex reserves to a new multi-month low.

The reserves reached a peak of $704.89 billion in September but have diminished likely due to the RBI's efforts to prevent the Rupee from depreciating sharply. Maintaining a robust forex reserve is crucial for shielding domestic economic activity from global financial disruptions.

The RBI's latest data indicates that India's foreign currency assets, the largest segment of the forex reserves, stand at $562.576 billion, while gold reserves amount to $68.056 billion. These reserves are estimated to cover the country's import needs for about a year.

In 2023, India bolstered its forex reserves by approximately $58 billion, a sharp turnaround from the $71 billion decline seen in 2022. FX reserves are held by central banks primarily in major currencies like the US Dollar, Euro, Yen, and Pound Sterling. The RBI monitors foreign exchange markets and intervenes to maintain orderly conditions, avoiding a fixed target for the Rupee's exchange rate.

To curb Rupee volatility, the RBI manages liquidity by buying or selling dollars as needed, making the Indian currency and assets more appealing to investors. Once one of Asia's most volatile currencies, the Rupee has now stabilized significantly over the past decade.

(With inputs from agencies.)