Indian Forex Reserves Drop $2.41 Billion in the Third Weekly Succession to $637.92 Billion

India's foreign exchange reserves which represents the weekly drop for the third consecutive week reduced by $2.41 billion to $637.92 billion released by the Reserve Bank of India (RBI) during the week ended April 26.

The latest decline follows the retrospective high of $648.56 billion which the reserves had reached at the beginning of April amid the multiple weeks of increase. The first record was set in September 2021 at 642.45 billion US dollars.

The reduction of reserves to the level of the week ended on April 26, was primarily accounted for by a fall in the value of the foreign currency assets by USD 1.16 billion, which was at the level of USD 559.70 billion as per the data of the RBI. Foreign currency holdings are, by and large, the biggest part of the monetary reserves.

Alongside being $1.28 billion lower than the previous week, the gold reserves are now at $55.53 billion. In contrast, the contributions to the special drawing rights (SDRs) were very marginal, with only a $15 million rise to $18.05 billion, while India's reserve position with the International Monetary Fund (IMF) increased by $8 million to $4.64 billion.

Pace 360 co-founder and chief global strategist Mr.Amit Goel remarked that the major cause of the drop in reserves was the negative revaluation of gold and foreign currency assets. He pointed out that the foreign institutional investors have been selling Indian equity, with a net sale of equity exceeding $4 billion for April, which was however offset by the inflows from the foreign direct investment as well as inflows in the Indian bond market.

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Sanjeev Agrawal, president of PHD Chamber of Commerce and Industry, felt optimistic about the country’s economic growth, attractiveness of the country to international investors, and export growth which is a huge help for the foreign currency reserves of the country that has now weighed $637 billion unfazed by geopolitical challenges and global economic uncertainty.

The forex reserves level is very critical to India because it gives it the ability to meet its import requirements and repay external debt, and may perform a role in some other fields.