India’s Forex Reserves Drop for Third Week
India’s foreign exchange reserves have decreased for the third consecutive week, following a record high earlier this month. As of October 18, the reserves fell by USD 2.163 billion to USD 688.267 billion, according to the Reserve Bank of India (RBI). In the previous two weeks, the reserves declined by USD 3.7 billion and USD 10.7 billion, respectively, from a peak of USD 704.885 billion.
Reasons for the Decline
The recent drop is likely due to RBI’s intervention to prevent a sharp depreciation of the Indian Rupee. The RBI intervenes in the foreign exchange market to maintain stability and prevent excessive volatility in the exchange rate.
Current Reserve Components
India’s foreign currency assets, the largest part of the reserves, stand at USD 598.236 billion. Gold reserves are valued at USD 67.444 billion. These reserves are sufficient to cover over a year of projected imports.
RBI’s Role in Market Stability
The RBI monitors the foreign exchange markets closely and intervenes to ensure orderly conditions. It buys dollars when the rupee is strong and sells when it is weak, contributing to the rupee’s stability. A stable rupee makes Indian assets more attractive to investors.
Doubts Revealed
Forex Reserves -: Forex reserves are like a country’s savings in foreign money, like dollars or euros. India uses these savings to pay for things it buys from other countries.
RBI -: RBI stands for Reserve Bank of India. It is like the big bank for all other banks in India and helps manage the country’s money.
Depreciation of the rupee -: Depreciation of the rupee means that the Indian rupee is losing value compared to other currencies like the US dollar. This can make buying things from other countries more expensive.
Imports -: Imports are goods or services that India buys from other countries. For example, if India buys oil from another country, that’s an import.
Market stability -: Market stability means keeping the prices of things steady and not letting them go up or down too quickly. This helps people and businesses plan better.
