Mumbai: In a poignant illustration of the volatility shadowing global markets, India’s foreign exchange reserves have taken another bruising hit, plummeting by a hefty $4.47 billion to $688.10 billion for the week ended November 22.
This marks the fourth decline in just five weeks, erasing much of the hard-earned gains that had bolstered the nation’s economic arsenal earlier this year.
The Reserve Bank of India (RBI) data paints a picture of multifaceted pressures. Foreign currency assets, the largest chunk of the kitty, dipped by $1.69 billion to $560.60 billion, reflecting jittery investor sentiments and dollar strength. But the real sting came from gold reserves, which cratered by $2.77 billion to $104.18 billion — a sharp reversal from their record highs, triggered by softening global bullion prices. Special Drawing Rights (SDRs) with the International Monetary Fund slipped by a modest $84 million to $18.57 billion, while the reserve tranche position edged down $23 million to $4.76 billion.
The rupee’s woes amplified the pain, stubbornly hovering at 89 or higher against the greenback throughout the week, curbing RBI’s intervention room.
On November 15, the reserves surged by $5.54 billion, reaching a peak of $692.58 billion, but the situation quickly deteriorated. Since the peak of $702.28 billion on October 18, the cumulative erosion has reached a daunting $14.18 billion, causing a net loss that has unsettled markets.
Economists attribute the slide to a cocktail of factors: geopolitical tremors, rising U.S. yields luring capital outflows, and domestic import spikes. Yet, at $688 billion, India’s forex buffer — enough for over 11 months of imports — remains a robust shield against external shocks. “Reserves are our first line of defence,” as RBI Governor Shaktikanta Das often quips. But with festive season demands waning and global uncertainties brewing, can this war chest rebound? Investors are closely monitoring the rupee’s relentless rally, hoping for stability despite the challenges it faces.