India's foreign exchange reserves declined by $7.511 billion to $681.384 billion in the week ended May 22, marking the second consecutive weekly drop, as per data released by the Reserve Bank of India (RBI) on Friday. This follows a decrease of $8.094 billion in the prior week, which brought reserves down to $688.894 billion.
Historical Context and Recent Trends
The reserves had reached an all-time high of $728.494 billion in the week ending February 27. However, they have come under pressure since the onset of the Middle East conflict, prompting the RBI to intervene in the currency market by selling dollars to support the rupee. Prime Minister Narendra Modi has also made public appeals urging citizens to conserve foreign exchange by reducing foreign travel, limiting fuel consumption, and refraining from gold purchases for a year.
Breakdown of Reserve Components
According to RBI data, foreign currency assets (FCAs), the largest component of the reserves, declined by $2.872 billion to $543.032 billion during the reporting week. Expressed in dollar terms, FCAs include the impact of movements in non-US currencies such as the euro, pound sterling, and Japanese yen held in the reserve portfolio.
The value of gold reserves fell by $4.53 billion to $114.786 billion during the week. Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) declined by $77 million to $18.748 billion. India's reserve position with the IMF also fell by $33 million to $4.818 billion at the end of the reporting week, RBI data showed.
Government and RBI Measures
The RBI's intervention through dollar sales aims to curb excessive volatility in the rupee exchange rate. Meanwhile, the government has encouraged measures to reduce the current account deficit and preserve foreign exchange. These efforts reflect a coordinated approach to maintain economic stability amid global uncertainties.
