New Delhi: India’s foreign exchange reserves declined by USD 6.711 billion to stand at $717.064 billion for the week ending February 6, according to the latest data released by the Reserve Bank of India. The dip comes after the country’s forex kitty had touched a record high of $723.774 billion in the previous week.
The overall fall in reserves was primarily driven by a sharp decline in gold reserves. Gold holdings witnessed significant erosion during the week, reflecting valuation changes and possible portfolio adjustments by the central bank. Gold forms an important component of India’s forex reserves, acting as a hedge against currency volatility and global economic uncertainties.
However, there was positive movement in foreign currency assets (FCAs), which form the largest portion of the reserves. FCAs rose by $7.661 billion on a week-on-week basis to reach $570.053 billion. These assets mainly include holdings in major global currencies such as the US dollar, euro, and pound sterling. The increase suggests strong capital inflows and favorable currency movements during the period.
Forex reserves are crucial for maintaining currency stability and managing external shocks. They provide a cushion against global financial turbulence and help in managing import bills, especially for crude oil and other essential commodities.
Despite the weekly dip, India’s reserves remain at comfortable levels, offering strong macroeconomic stability. Economists believe that temporary fluctuations are common due to currency valuation changes and global market dynamics.
With reserves still above the $700 billion mark, India continues to maintain one of the world’s strongest external buffers among emerging economies. Market participants will closely watch upcoming RBI data to assess trends in gold holdings and foreign currency assets in the coming weeks.