India Forex Reserves : Highlights
After 3 consecutive years of rise, India’s forex reserves declined by $70 bn in 2022 on account of rising inflation and interest rates.
- This decline can be primarily about 55-60% of total loss attributed to the valuation loss of other foreign currencies (€, £, ¥) against USD that India held as reserves.
- Another major cause is the FPI withdrawal.
- Due to this, the number of months of imports that can be covered through India’s reserves have also declined (from 13 in 2021-22 to 9.2 in 2022-23).
- Holding forex reserves reduces the likelihood of BoP crises and helps preserve economic and financial stability against disordered market conditions.
- India’s Forex Reserves include- Foreign Currency Assets, Gold reserves, Special Drawing Rights, Reserve position with the IMF.
