India’s foreign exchange reserves have declined by $1.781 billion, reaching $638.698 billion as of February 28, according to the latest data from the Reserve Bank of India (RBI). This marks a volatile trend, with some weeks experiencing gains and others seeing further declines. The reserves have been falling since reaching an all-time high of $704.89 billion in September, representing a nearly 10% drop from its peak. Analysts believe the recent decline is due to the RBI’s actions to stabilize the Indian Rupee, which has been hovering near its all-time low against the US dollar.
The RBI’s foreign currency assets (FCA) stood at $543.350 billion, while gold reserves amounted to $73.272 billion. The total reserves are sufficient to cover approximately 10-11 months of projected imports. In 2023, India’s foreign exchange reserves increased by around $58 billion, reversing the $71 billion decline seen in 2022. However, the reserves have only grown by about $20 billion so far in 2024.
The RBI manages the foreign exchange reserves to stabilize the Rupee, often selling dollars to curb depreciation and buying when the Rupee strengthens. The reserves, primarily held in US dollars, also include smaller holdings in the Euro, Japanese Yen, and Pound Sterling. Overall, while the recent decline is concerning, the reserves remain robust and sufficient to cover India’s import needs. The RBI’s efforts to stabilize the Rupee and manage the foreign exchange reserves will continue to be closely monitored by analysts and investors.