India foreign exchange reserves: India’s forex reserves fall by $5.22 billion for week ending Sep 16

India’s foreign exchange reserves fell by $5.22 billion to $545.65 billion for the week ending Sep 16, according to data released today by the Reserve Bank of India.

The fall in the foreign exchange reserves can be attributed to a fall in the Foreign Currency Assets (FCA), which is a major component of the overall reserves, according to the Weekly Statistical Supplement released by RBI.

Foreign currency assets dropped $4.70 billion to $484.90 billion for the same period. Gold reserves fell $458 million to $38.19 billion.

Expressed in dollar terms, FCA consists of the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

India’s spot forex reserves have fallen from $607 billion in end-March.

Deutsche Bank recently said that India’s overall foreign exchange reserves will deplete further this year due to a ballooning current account deficit and interventions by the central bank to support the rupee, which today tumbled past 81 per dollar to a record low. The currency posted its worst week since April last year, shedding 1.6% with most of the losses in the past two trading sessions.

Foreign exchange reserves could fall to $510 billion even in a worst case scenario if the current account deficit widens to 4 percent during FY’23 estimates IDFC First Bank. Still we would be better off than the Taper Tantrum period of May 2013 when reserves were less than $300 billion.

However, the reserves are adequate to cover 8.9 month of imports compared to 4.1 months in May 2013 and ratio of short-term debt to reserves at 44 per cent compared to 60 per cent in June 2013 an analysis of official data shows.

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