India's Forex Reserves Take a Hit

NEW DELHI: In a significant financial update, India's foreign exchange reserves have seen a substantial decrease, dropping by $8.714 billion to $625.871 billion as of the week ending January 10. This decline, as reported by the Reserve Bank of India (RBI) on Friday, marks a continuation of the downward trend observed in recent weeks.

Understanding the Decline

The reduction in reserves has been primarily attributed to two factors: revaluation effects and the RBI's active interventions in the forex market aimed at stabilizing the rupee's fluctuations. Earlier, the reserves had decreased by $5.693 billion to $634.585 billion in the week ended January 3, according to the central bank.

Historical Context and Current Status

It's noteworthy that the reserves had previously peaked at $704.885 billion at the end of September. The foreign currency assets, which form a significant part of the reserves, have reduced by $9.469 billion to $536.011 billion, as per the latest data.

Impact of Global Currencies

The value of foreign currency assets, when expressed in dollar terms, includes the impact of appreciation or depreciation of non-US currencies such as the euro, pound, and yen held in the foreign exchange reserves.

Other Components of Reserves

Additionally, the RBI reported that Special Drawing Rights (SDRs) decreased by $33 million to $17.781 billion, and India's reserve position with the International Monetary Fund (IMF) decreased by $4 million, standing at $4.195 billion in the reporting week. On a positive note, gold reserves increased by $792 million, reaching $67.883 billion during this period.