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India’s foreign exchange reserves decline for first time in 7 weeks, fall by $5.9 bn

RBI data shows forex reserves dropped to $617.3 billion in week ending Jan 5, slipping from $623.2 bn previous week

India’s rising foreign exchange reserves saw a blip, registering the first decline in seven weeks. According to RBI data, forex reserves fell by $5.9 billion to $617.30 billion in the week ending January 5, 2023.

The reserves stood at $623.20 billion in the previous week, as per the RBI. The drop has been attributed largely to a slide in foreign currency assets, which declined by $4.96 billion to $546.65 billion during the week.

Gold reserves also fell by $839 million to $47.48 billion. SDRs dipped by $67 million to $18.29 billion, while reserves with IMF slid $26 million to $4.86 billion.

The RBI’s intervention in currency markets and changes in valuation due to currency fluctuations are seen as factors impacting the foreign currency assets.

Despite the decline, India’s forex reserves remain substantial. The government has maintained the country has adequate reserves to tide over global uncertainties.

In October 2021, reserves had touched $645 billion before starting a downward trajectory. The slight blip comes even as the rupee continues to strengthen against the dollar. On Friday, it closed at 82.92, up 12 paise.

While the marginal decline in forex reserves may stem from RBI’s intervention to curb excess volatility, overall reserves remain strong. The current levels can comfortably fund over a year of imports and provide a cushion against external shocks amid global headwinds.

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