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India’s foreign exchange reserves are primarily made up of the Reserve Bank of India’s holdings of foreign currency assets and gold.
India's foreign exchange reserves declined to $616.10 billion as on February 16, data released by the Reserve Bank of India (RBI) on February 23 showed.
At $616.10 billion, the forex reserves were down $1.13 billion from the previous week. However, it follows an even larger decline of $5.24 billion in the week ended February 9, resulting in the latest figure being the lowest in two months.
Also Read: India faces 'problem of plenty' from FX inflows post index inclusion, US rate cuts
The reserves were last lower when they stood at $615.97 billion as on December 15.
The break-up of the forex reserves as of February 16 is as follows:
- Foreign currency assets: $545.78 billion, down $740 million week-on-week
- Gold: $47.38 billion, down $362 million week-on-week
- Special Drawing Rights: $18.11 billion, down $28 million week-on-week
- Reserve position in the International Monetary Fund: $4.83 billion, down $1 million week-on-week
Changes to the foreign exchange reserves occur from the sale or purchase of foreign assets as well as the appreciation or depreciation of the currencies they are denominated in. The RBI's stated stance is to only intervene in the market to prevent sharp volatility in the rupee's exchange rate.
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Despite the forex reserves being at their lowest in two months, they remain not too far from their all-time high of $642.45 billion, which was hit in September 2021.
"Vulnerability indicators suggest greater resilience of India's external sector. We are confident of comfortably meeting all our external financing requirements," RBI Governor Shaktikanta Das had said on February 8.
The forex reserves are expected to rise further in the coming months, especially after Indian government bonds are listed on JPMorgan's global indices starting June. Economists see more than $20 billion worth of foreign funds coming into Indian sovereign debt over a 10-month period, which the RBI is expected to mop-up - which would add to its reserves - to prevent the rupee from appreciating sharply.
Also Read: After JPMorgan, Indian govt bonds could be part of Bloomberg indices in 2024