India's forex reserves decline further

India's forex reserves witnessed further decine in the second straight week. According to official data, the forex reserves declined to $589.14 billion by May 26 reflecting a deficit of $4.34 billion.

Last week also there was decrease of $6.05 billion in reserves, the biggest fall in the past three months.

The fall was attributed to the sale of dollars by the RBI to stem the fall of rupee.

Recently, RBI Governor Shaktikant Das defended the decision to sell dollars to stable the rupee. Rupee rose by 0.1% in the week ending 26^th May with the rise from 82.5575 to 82.8500.

The changes in foreign currency assets, expressed in dollar terms, include the effects of appreciation or depreciation of other currencies held in the RBI's reserves.

According to the RBI data foreign currency assets have fallen by $4.6 Billion and came down to $524.95 billion. Gold reserves have also fallen. The gold reserve has come down by $1.22 billion to $45.12 billion. Reserves in the IMF decreased by $35 million and stood at $51.30 billion.

Country’s foreign exchange reserve was $645 Billion in October 2021.

After October 2021 to October 2022 there was continuous decline in foreign exchange reserves. During this Rupee was continuously getting weaker vis-a-vis of Dollar. To strengthen the Rupee the RBI had to sell dollars. Then the foreign exchange reserve fell to $525 billion. Recently, the RBI governor has also defended his decision. He said that it is the duty of RBI to ensure stability in the exchange rate.

The RBI governor said that due to the Russia-Ukraine war, the withdrawal of foreign investment was seen. In such a situation, in order to instill confidence among the domestic and foreign investors, the RBI had to step in to stop the fluctuations in the exchange rate.