India’s Forex Reserves Slip to $719.8 Billion as Gold Valuations Fall

Synopsis

The Reserve Bank of India reported that India's foreign exchange reserves fell by $1.27 billion to $719.75 billion in the week that ended Oct. 23, for a seventh straight week. Foreign currency assets increased by $1.36 billion, but are offset by a $2.65 billion drop in gold holdings due to valuation changes. Reserves have dipped nearly $66 billion from the record high of $785.7 billion in early September after the central bank sold dollars to reduce volatility in the rupee.

Gain in currency assets is offset by Gold

Data released on October 30th by the Reserve Bank of India (RBI) in its Weekly Statistical Supplement has revealed a decrease in India's foreign exchange reserve by $1.269 billion during the week ending October 23, bringing the total to $719.748 billion.

The most significant increase was in foreign currency assets, which jumped $1.358 billion to $593.205 billion, and a $2.65 billion drop in gold reserves to $103.15 billion. Gold's price drop was due to valuation losses, and it was the seventh consecutive weekly decrease in total reserves. To sum up, India's Forex Reserves fell yet again, for the seventh consecutive week, to $719.8 Billion.

From Seven weeks of Attrition to a record High

The reserves have reached a new peak of $785.7 billion in the week that ended on September 4, but have since declined by some $66 billion as the central bank traded dollars to dampen volatility on the market. In 2026, the rupee has fallen 5.35 per cent from its value against the dollar. The RBI was also holding a meeting to meet the dollar demand of oil companies.

Explain why the composition is important

The RBI has collected $143.5 billion in inflows during the period from June 8 to September 18, primarily foreign-currency deposits. The experts cite deployment of FCNR(B) deposit resources and RBI dollar sales supporting the rupee as the reasons for the recent reduction. Short-dated deposits boost spot reserves and impose a later dollar delivery requirement, said market comment on the data.

What the IMF has said:

The International Monetary Fund (IMF) has upgraded India's growth estimates for the upcoming fiscal year from 6.4 per cent to 7 per cent, while citing various risks to growth, such as Strait of Hormuz disruptions, weakening rupee and rising borrowing rates. In an interview, the IMF's Asia and Pacific Department Director Krishna Srinivasan said that the rupee should be the first line of defence. The Central bank should intervene in the event of depreciation giving rise to inflation or destabilizing markets, he said.

Outlook

Reserve movements are expected to continue following oil prices, pressure on rupee and valuations of gold. India's reliance on crude oil imports is at about 89 per cent and as crude oil prices go up, dollar demand increases. On Friday (see our companion report) crude was holding steady at a six-month high for Brent. The extra cost may add to the tensions on the currency and the stock of reserves.