India’s foreign exchange reserves rise for a second week, pace eases

India's foreign exchange reserves rose for a second week, amid somewhat easing of pressure on the rupee due to softening crude and commodity prices and a less hawkish Fed.

The foreign exchange reserves of Asia's third largest economy rose $2.54 billion to $547.25 billion for the week ending Nov 18, according to data released today by the Reserve Bank of India.

The rise in the foreign exchange reserves can be attributed to gains in the Foreign Currency Assets (FCA), which is a major component of the overall reserves, according to the Weekly Statistical Supplement released by RBI.


Foreign currency assets rose $1.76 billion to $484.29 billion for the week ending Nov 18. Gold reserves rose $315 million to $40.01 billion.

Expressed in dollar terms, FCA consists of the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

For the week ended Nov 18, the rupee fell 1.1%.The rupee dipped to 81.6850 per U.S. dollar today and closed little changed for the week.

For the week ending Nov 11, the foreign exchange reserves had jumped by a whopping $14.72, the biggest weekly jump since August 2021, reflecting the impact of an estimated $8 billion worth of recent overseas currency purchases by the central bank amid rising global appetite for local growth assets.

However, experts opine that the future pace of increases in forex reserves may not be sharp. China is re-emerging as a competitor for international investors’ funds. As China begins to ease curbs and move to focus on the economy, it’s beaten down valuations vis a vis India’s steepest valuations could turn out to be India’s disadvantage and temper down flows.

"We think India’s fundamentals and attractiveness on growth remains high " said Rahul Bajoria, chief India economist at Barclay's Capital. " But some re-circulating away in tactical inflows cannot be discounted".

The spot forex reserves have fallen from $607 billion in end-March and are now down by $95.2 billion from the record high of $642.45 billion seen on September 3 last year. However, this is better than the total depletion of $117.93 billion reported for the week ending Oct. 21, when forex reserves had slumped to an over two-year low of $524.52 billion.

The forex reserves have depleted for 11 weeks out of 15.