India's foreign exchange reserves witnessed a significant decline during the week ending November 21, marking a reversal from the previous week's gains. According to data released by the Reserve Bank of India on Friday, the country's overall reserves dropped by $4.472 billion to $688.104 billion.
Major Components Show Decline
The decrease in India's foreign exchange reserves was primarily driven by a substantial drop in gold reserves value. The precious metal component saw a steep erosion of $2.675 billion, falling to $104.182 billion during the reporting week.
Foreign currency assets (FCAs), which represent the largest portion of the reserves, also registered a decline. The RBI reported that FCAs decreased by $1.69 billion to $560.6 billion. It's important to note that foreign currency assets include valuation changes in major global currencies such as the euro, British pound, and Japanese yen against the US dollar.
Other Reserve Components Also Fall
The decline extended to other components of India's foreign exchange reserves as well. Special Drawing Rights (SDRs) with the International Monetary Fund decreased by $84 million to $18.566 billion during the week.
Additionally, India's reserve position with the IMF also saw a reduction, dropping by $23 million to $4.757 billion. This comprehensive decline across multiple reserve components indicates broader market movements affecting the country's foreign exchange holdings.
Context and Previous Performance
The recent drop contrasts sharply with the previous reporting week's performance, where India's foreign exchange reserves had increased by $5.543 billion to $692.576 billion. This volatility in reserve levels reflects the dynamic nature of global currency markets and valuation changes in reserve assets.
The fluctuation in gold reserves value is particularly significant given the metal's substantial share in India's overall foreign exchange reserves portfolio. Changes in international gold prices directly impact the dollar value of these holdings.
Despite the weekly decline, India maintains one of the world's largest foreign exchange reserves, providing substantial buffer against external economic shocks and supporting the country's international financial position.
