India's foreign exchange reserves fell by $51.1 billion over four consecutive weeks — the largest four-week decline in dollar terms since the RBI's weekly reserves data series began in September 1998, according to Reserve Bank of India data reported on October 11.
From record high to $734.6 billion
Reserves dropped from a record $785.71 billion in the week ended September 4 to $734.61 billion in the week ended October 2. The latest reporting week alone saw a $12.95 billion fall — the fourth straight weekly decline — driven by a drop in foreign currency assets and a lower reported value of gold holdings. RBI dollar sales to manage pressure on the rupee may also have contributed to the drawdown.
Why reserves are falling
Economist Mitali Nikore told Times Now that three forces are at work. First, oil: the Indian crude basket averaged $116 a barrel in September against $82 in July, so rising import costs are consuming dollars faster. Second, foreign investors have pulled a net $10.3 billion out of Indian shares and bonds since April, driven by the West Asia crisis and a flight to safety. Third, a temporary source of dollar inflows has slowed — the RBI's special swap windows for NRI deposits and overseas borrowings brought in $143.6 billion up to September 18, and the NRI deposit window closed on August 31.
Import cover remains at about 11 months, and the RBI has opened a special dollar window for state-run oil marketing companies from October 12 to ease pressure on the rupee, which closed at 96.73 to the dollar on Friday.
Sources:
Times Now: "India's Forex Reserves Fall $51.1 Billion In 4 Weeks, Biggest Four-Week Drop Since 1998"
From record high to $734.6 billion
Reserves dropped from a record $785.71 billion in the week ended September 4 to $734.61 billion in the week ended October 2. The latest reporting week alone saw a $12.95 billion fall — the fourth straight weekly decline — driven by a drop in foreign currency assets and a lower reported value of gold holdings. RBI dollar sales to manage pressure on the rupee may also have contributed to the drawdown.
Why reserves are falling
Economist Mitali Nikore told Times Now that three forces are at work. First, oil: the Indian crude basket averaged $116 a barrel in September against $82 in July, so rising import costs are consuming dollars faster. Second, foreign investors have pulled a net $10.3 billion out of Indian shares and bonds since April, driven by the West Asia crisis and a flight to safety. Third, a temporary source of dollar inflows has slowed — the RBI's special swap windows for NRI deposits and overseas borrowings brought in $143.6 billion up to September 18, and the NRI deposit window closed on August 31.
Import cover remains at about 11 months, and the RBI has opened a special dollar window for state-run oil marketing companies from October 12 to ease pressure on the rupee, which closed at 96.73 to the dollar on Friday.
Sources:
Times Now: "India's Forex Reserves Fall $51.1 Billion In 4 Weeks, Biggest Four-Week Drop Since 1998"
