Amid the depreciation of the rupee and efforts by the Reserve Bank of India (RBI) to control it, the foreign exchange reserves of India have dropped to their lowest level since July 2020. RBI's weekly statistical supplement showed on Friday that the forex reserves of India fell by $3.85 billion to $524.52 billion in the week ending on 21 October.
During the week, the rupee hit a record low of 83.29 against the dollar with the central bank forced to intervene in spot and forward markets to contain the downfall. The reserves rose marginally during the week ended 7 October but had been falling consistently for the previous eight straight weeks.
For the week that ended on 14 October, the number of foreign exchange reserves was $528.37 billion. The amount has sharply declined from the record $624.4 billion last year.
As the world is reeling from the economic crisis with almost every central bank raising interest rates to curb soaring inflation, foreign exchange reserves are falling globally. China has seen the highest decline in foreign currency as it lost $159 billion in its reserves between 1 April and 30 September. Second comes India with almost $85 billion and Russia, whose war on Ukraine is one of the triggering points of this global economic crisis, has also lost $64 billion of forex reserves.
The International Monetary Fund said global reserves have fallen by around $884 billion during the first half of 2022. The total foreign reserves of emerging markets and developing economies dropped by more than 6% in the first seven months of this year.
“Some emerging Asia central banks, mainly in India and China, scaled up the degree of exchange rate inflexibility in response to the US Federal Reserve’s tightening and a stronger dollar, which also led to EM currencies outperforming the more flexible advanced economies’ currencies. This has been afforded by a significant rundown in forex reserves," a Systematix Institutional Equities report in September said.
India's forex reserves fall by $3.85 billion, lowest since July 2020 | Mint - Mint
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