India's forex reserves ease after hitting over nine-month highs; what it means for Indian economy?
Mumbai, April 29: India's foreign exchange reserves fell by $2.16 billion to $584.24 billion on a weekly basis as of April 21, according to the Reserve Bank of India's data released on Friday.
During the prior week that ended on April 14, they rose by $1.657 billion to $586.412 billion, witnessing a level not seen in more than nine months. According to RBI's latest data, India's foreign currency assets, the biggest component of the forex reserves, fell by $2.14 billion to $514.48 billion.
Gold reserves during the latest week fell by $24 million to $46.15 billion. In October 2021, the country's foreign exchange reserves touched an all-time high of $USD 645 billion. Much of the decline can be attributed to RBI's recent intervention and a rise in the cost of imported goods.
Also, the forex reserves had fallen largely because of the RBI's intervention in the market to defend the depreciating rupee against a surging US dollar.
Typically, the RBI, from time to time, intervenes in the market through liquidity management, including through the selling of dollars, with a view to preventing a steep depreciation in the rupee.
The RBI closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions by containing excessive volatility in the exchange rate, without reference to any pre-determined target level or band.
Understanding foreign reserves
Forex reserve is one of the major parameters to measure the country's economic growth. The central bank (RBI) supplies foreign currency to keep markets steady. To ensure that a country meets its foreign obligations and liabilities.
What does India forex reserves consist of?
The four components of forex reserves are foreign currency assets, gold, special drawing rights and the reserve position in the International Monetary Fund.
- ANI
