Mumbai, April 1

The country’s foreign exchange reserves declined by $2.030 billion in the week ended March 25, 2022, primarily due to fall in foreign currency assets.

Forex reserves stood at $617.648 billion as at March 25, 2022.

Forex reserves had declined by $2.597 billion in the week ended March 18, 2022, and by $9.646 billion in the week ended March 11, 2022.

In the reporting week, foreign currency assets (FCAs) fell by $3.202 billion in the reporting week. FCAs comprise multi-currency assets (securities, deposits with other central banks & BIS, and deposits with commercial banks overseas) that are held in multi-asset portfolios.

The only component of the forex reserves that increased was gold, which was up $1.230 billion during the reporting week.

Other components

The other two components of the reserves declined -- Special Drawing Rights (by $44 million) and Reserve Position in the IMF ($14 million) -- during the reporting week.

Since March-end 2021, India’s forex reserves have increased by $40.664 billion.

Radhika Rao, Senior Economist, DBS, in a report on March 31, 2022, said that RBI’s strong intervention efforts are reflected in an $11 billion drop in foreign reserves this calendar year and down about $20 billion since hitting the record high in September 2021.

“In effect, reserves are being put to their intended use -- slow rupee volatility but not reverse its weakening trend. At current levels, the reserves stock is still well cushioned, ranking well on all adequacy metrics including short-term external debt (0.2x of reserves), total external debt, imports cover as well as on the IMF metrics,” Rao said.

Barclays, in a report, has forecast that India will record an overall balance of payments deficit of $20 billion in FY22-23, which would reduce its foreign reserves to $600 bilion by March 2023, from $620 billion in March 2022.

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