India’s foreign exchange reserves declined by USD 10.7 billion during April–December 2024, including valuation effects, according to the Reserve Bank of India’s latest data on the balance of payments (BoP). The total decline compares sharply with a rise of USD 44.0 billion during the same period in 2023.
On a BoP basis, which excludes valuation changes, the reserves contracted by USD 13.8 billion during April–December 2024, in contrast to an accretion of USD 32.9 billion in the year-ago period.
The drop in reserves was primarily driven by a higher current account deficit of USD 37.1 billion and a subdued capital account inflow of only USD 23.3 billion. Within the capital account, foreign direct investment (FDI) stood at USD 1.6 billion, while portfolio investment was USD 9.4 billion — a steep decline from the previous year’s USD 32.7 billion. Foreign institutional investment also fell sharply from USD 33.0 billion to USD 9.3 billion.
NRI deposits under banking capital, however, rose to USD 13.3 billion during the nine-month period, up from USD 9.3 billion in the same period last year. Meanwhile, short-term credit and external commercial borrowings turned net positive at USD 11.1 billion and USD 7.9 billion, respectively.
Valuation changes — largely reflecting gold price fluctuations — contributed to a smaller gain of USD 3.1 billion, compared to USD 11.1 billion in the previous year.
This marks a reversal in India’s forex reserve trajectory amid global uncertainties, subdued foreign investments, and persistent current account pressures. Analysts suggest the figures underscore the need for continued vigilance on external sector dynamics as India navigates its macroeconomic and geopolitical landscape.