The country’s total reserves declined by $11.68 billion to $716.8 billion, down from $728.4 billion in the previous week ended February 27. The drop was driven primarily by a fall in foreign currency assets and a decline in gold holdings.
The movement in reserves comes at a time when the Indian rupee has been experiencing heightened volatility, with the currency recently touching record lows against the US dollar. The pressure on the rupee has been partly linked to the ongoing geopolitical tensions stemming from the US-Israel-Iran war, which have contributed to instability in global energy markets.
India, which relies heavily on imported energy, has been particularly exposed to the resulting oil and LPG supply concerns, as rising crude prices widen the country’s trade deficit and increase demand for dollars. This dynamic has added a downward bias to the rupee, prompting the Reserve Bank of India to occasionally intervene in currency markets to smoothen volatility, often drawing down reserves in the process.
Foreign currency assets (FCA)-the largest component of India’s reserves-fell by $9.88 billion to $519 billion during the week. These assets largely consist of major foreign currencies such as the US dollar, euro, pound sterling and yen, and their valuation can fluctuate due to movements in global exchange rates.
Gold reserves also declined by $1.6 billion to $471 billion. The drop reflects both valuation changes amid softer global gold prices and the central bank’s ongoing efforts to rebalance and diversify its reserve portfolio.
Despite the weekly decline, India’s external buffers remain strong. The country’s forex reserves are still close to their historical highs and can provide import cover for about 10 months, offering a significant cushion against external shocks.
