Forex Reserves Continue To Decline, Slide By $734.5 Million For Week Ending 13 July

Continuing their trend of decline, foreign exchange reserves in the country came down – by $734.5 million – to $405.075 billion, for the week ending 13 July, as per RBI data, Business Standard has reported.

In the earlier week, the kitty had declined – by $248.2 million -- to $405.81 billion.

The reserves had touched an all-time high of $426.028 billion in the week ended 13 April, 2018.

Foreign reserves comprise of foreign currency assets, gold reserves, special drawing rights (SDRs) and the RBI’s position with the international monetary fund. Of this, gold reserves have increased this week -- by $75.4 million -- to $21.115 billion.

Foreign currency assets (FCAs), a major component of the overall reserves, declined to $380 billion, in the week under review. FCAs consist of nearly 20-30 per cent of major global currencies, as well as investments in US Treasury bonds, other governments’ bonds and deposits with foreign central and commercial banks. India’s reserve position with the IMF also declined by $13 million to $2.476 billion.

Foreign exchange reserves come under pressure when the rupee depreciates. According to Subhash Chandra Garg, India’s economic affairs secretary, the volatility of the rupee is being driven by the proposed US sanctions on Iran and the demand-supply mismatch in oil.

As pointed out in a report, forex reserves have been depleting because the rupee is under pressure from the rising oil prices, strong dollar, tightening of global liquidity and global trade skirmishes. Other countries like China are also witnessing depleting forex reserves. The report also has an expert pointing out that falling reserves are not an issue right now because India’s foreign exchange reserves crossed the $400-billion mark for the first time only in September 2017.

Meanwhile, the government is also not unduly worried. The economic affairs secretary had said three weeks ago that “We have adequate reserves, there is adequate firepower”. He had added that should the need arise, funds could be raised through FCNR deposits, sovereign bonds or other routes: “The options are open, if we assess at any stage that we need to buttress our reserves. That situation has not arisen”.