India's forex reserves experience $2 billion dip, gold reserves decline
What's the story
India's foreign exchange reserves have seen a decrease of over $2 billion, settling at $646.673 billion for the week ending May 24, as per data from the Reserve Bank of India (RBI). This decline follows a three-week period of growth where the reserves had risen by an impressive $10.8 billion. The previous week had marked a record high for the forex reserves at $648.7 billion.
Asset decrease
Foreign currency assets and gold reserves also decline
The largest component of the forex reserves, the foreign currency assets (FCA), also experienced a decrease, falling by $1.510 billion to $567.499 billion in the same week. The RBI data revealed that gold reserves too saw a decline, dropping by $482 million to stand at $56.713 billion. Additionally, India's reserve position with the International Monetary Fund (IMF) slightly decreased by $1 million to reach $4.326 billion, for the week ending May 24.
Reserve coverage
Forex reserves still cover 11 months of projected imports
Despite the recent decreases, an RBI report indicates that India's foreign exchange reserves are still sufficient to cover about 11 months of projected imports for the country. The forex reserves have seen a cumulative growth of about $28 billion so far this year. In 2023, the central bank added about $58 billion to its foreign exchange kitty, while in 2022, it had fallen by $71 billion.
Intervention toolkit
RBI plans to curb INR volatility against USD
The RBI has announced plans to "enhance intervention toolkit" in fiscal 2025, to curb undue Indian Rupee (INR) volatility against the US Dollar, although, it has not specified what new tools it would use. During the week, the rupee traded between ₹83.0250 and ₹83.3600 against the Dollar, marking its best week in over five months. However, it ended at ₹83.4625 on Friday, logging its worst week in more than two months.