India’s foreign exchange reserves fell by $8.1 billion in the week ended May 15, slipping to $688.9 billion as the ongoing conflict in West Asia continued to exert pressure on the rupee and weigh on emerging market sentiment, data released by the Reserve Bank of India on Friday showed.
The May 15 figure is also the fourth lowest since the beginning of the year. The decline reverses a modest recovery seen in the previous two weeks, when reserves had climbed back to nearly $697 billion after touching a recent low of $688.1 billion on March 27.
The fall was broad-based. Foreign currency assets, the largest component of the reserves, dropped by $6.5 billion to $545.9 billion, while gold reserves shed $1.5 billion to $119.3 billion in the same week. Special Drawing Rights (SDRs) remained largely stable at $18.8 billion.
The reserves had peaked at $728.5 billion on February 27, just before the war in West Asia began. Since then, however, escalating hostilities in West Asia have pushed crude oil prices higher, widening India’s import bill and prompting the RBI to intervene in currency markets to arrest a sharp depreciation in the rupee.
Despite the recent drawdown of roughly $40 billion from the February peak, India’s reserves still cover approximately 11 months of projected imports, providing a substantial cushion. Analysts consider this level comfortable by international standards.
Against this backdrop, Prime Minister Narendra Modi made an appeal to citizens earlier this month, urging Indians to collectively do their bit to conserve foreign exchange by reducing their dependence on imported goods, particularly cooking oil, cut down on use of petrol, revive the work-from-home practices that became common during Covid and avoid unnecessary foreign travel.
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