India's Forex Reserves Hit Multi-Month Low Amid RBI's Stabilization Efforts

India's foreign exchange reserves have slumped significantly, declining by USD 8.478 billion in a week to USD 644.391 billion. These reserves have been dwindling over the past 12 weeks due to RBI's intervention to prevent Rupee depreciation. The reserves cover a year's projected imports, showing strategic management.

India's foreign exchange reserves have once again dipped, plunging by USD 8.478 billion within a week, settling at USD 644.391 billion, according to Friday's data from the Reserve Bank of India (RBI). The drop reflects a consistent downward trend observed in 11 of the last 12 weeks, marking a new multi-month low.

Since hitting a record high of USD 704.89 billion in September, India's forex reserves have been on a decline. This reduction is attributed to the RBI's proactive measures to prevent the Rupee from depreciating sharply. Maintaining a robust foreign reserve is critical for safeguarding the domestic economy against global financial disruptions.

Detailed data from the RBI reveals that India's foreign currency assets, the main component of its reserves, were at USD 556.562 billion, while gold reserves amounted to USD 65.726 billion. Projections suggest these reserves are adequate to cover nearly a year's imports, despite fluctuations in figures.

In 2023, there was a considerable infusion of USD 58 billion into the reserves, a stark contrast to the USD 71 billion decline in 2022. Entering 2024, the reserves saw a modest increase of over USD 20 billion, a figure that could have been higher without the recent dip.

The RBI's monitoring of the forex market focuses on stabilizing the Rupee's value, avoiding set target levels. The central bank often steps in by adjusting liquidity and selling dollars to curb excessive volatility, continuing its strategic approach seen over the past decade.

This strategy has transformed the Indian Rupee from one of Asia's most volatile currencies to one of its most stable, helping increase the attractiveness of Indian assets to investors.

(With inputs from agencies.)