According to Reserve Bank of India (RBI) reports, India’s forex reserves declined by $678 million to $634.28 billion as a result of a steep drop in foreign currency holdings. As per the RBI’s weekly statistics update, foreign currency holdings, which make up the majority of Foreign exchange reserves, fell from $1.115 billion to $569.582 billion during the past week under evaluation.
The impact of change in the value of non-dollar currencies kept in foreign currency reserves, such as the Japanese Yen, the Pound Sterling of the United Kingdom, and the Euro is included in the foreign currency holdings, which are expressed in US dollar figures.
According to the statistics, gold reserves increased by USD 726 million to USD 39.77 billion in the reported period. The amount of India’s Special Drawing Rights (SDR) with the IMF fell from $68 million to $19.152 billion, whereas the amount of India’s reserve balance with the IMF fell from $22 million to $5.216 billion.
India is a big importer & as we buy anything from a foreign country, the payment is done in dollars. Foreign exchange reserves are required in such circumstances to assist with imports. If there is a dramatic drop in foreign investments, it becomes much more important.
For Reserve Bank foreign currency reserves are crucial. When it comes to fiscal policy, the amount of foreign exchange reserves held by the RBI is a crucial concern.
The Indian currency gains strength when the RBI’s reserve is loaded with dollars. When foreign investors invest resources in India’s economy, it conveys a message to the rest of the globe that they are growing more confident in the Indian economy.
