Key Headings:
- India’s Foreign Exchange Reserves Decline by $1.5 Billion
- Foreign Currency Assets (FCA) Fall by $1.32 Billion
- Rupee Remains Stable Despite Decline in Reserves
- Impact of Decline on the Indian Economy
India’s foreign exchange reserves saw a decline of $1.5 billion in three weeks, bringing the total to $575.27 billion in the week ending February 3, according to the Reserve Bank of India’s weekly statistical supplement.
Reasons for Forex Reserves Decline
The main reason for the drop was the decline in Foreign Currency Assets (FCA), which fell by $1.32 billion to $507.69 billion for the same week. Meanwhile, gold reserves also decreased by $246 million to $43.78 billion.
This drop comes in a three-week period of steady growth in the reserves, which had risen by over $15 billion and reached a six-month high of $576.76 billion during the week ending January 27.
Despite this recent decline, the Indian rupee has remained one of the least volatile currencies among its Asian peers in 2022 and continues to be so in 2023. RBI Governor Shaktikanta Das attributes this stability to the resilience of the Indian economy, even during periods of multiple shocks.
Shaktikanta Das Statement
“In a fundamental sense, the movements of the rupee reflect the resilience of the Indian economy,” said Das in a recent statement. “The depreciation and volatility of the rupee during the current phase of multiple shocks were far lower than it was during the global financial crisis and the taper tantrum.”
The rupee closed at 82.50 against the US dollar on February 10, further solidifying its status as a stable currency.
Impact on the Indian Economy
The decline in foreign exchange reserves can significantly impact the Indian economy, as it reduces the country’s ability to intervene in the foreign exchange market and support the value of the rupee. Additionally, a decrease in reserves can indicate a negative balance of payments, as more money is leaving the country than coming in.
However, experts believe the current decline is not a cause for alarm and is a natural fluctuation in the foreign exchange market. India has a strong economy with a large pool of human and financial resources, which helps mitigate fluctuations in foreign exchange reserves.
Sources: moneycontrol.com
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