India's foreign exchange reserves drop $7.5 billion to $572.7 billion

India’s foreign exchange reserves dropped $7.5 billion to $572.7 billion during the week ended July 15, the latest data released by the Reserve Bank of India (RBI) showed. The reserves are now at 20-month low, lowest since November 6, 2020, when they were at $568 billion.

The decline in foreign exchange reserves during the week is mainly due to foreign currency assets that were down $6.5 billion, the data showed.

Reserves have fallen about $60 billion in 2022, which was mainly due to aggressive intervention by the central bank to curb the sharp volatility in the foreign exchange market. The rupee has come under pressure since the war broke out in Europe in late February. The Indian unit has depreciated around 7 per cent against the dollar in 2022.

Foreign exchange reserves depleted around $70 billion from its peak in September 2021.

RBI Governor Shaktikanta Das on Friday said the current level of foreign exchange reserves were adequate.

“…the Indian rupee is holding up well relative to both advanced and emerging market economies (EME) peers. This is because our underlying fundamentals are strong, resilient, and intact. The recovery is gradually strengthening. The current account deficit is modest. Inflation is stabilising. The financial sector is well-capitalised and sound. The external debt-to-GDP ratio is declining. The foreign exchange reserves are adequate,” Das said.

The July RBI bulletin had said the foreign exchange reserves at $ 580.3 billion on July 8, 2022, were equivalent to 9.5 months of imports projected for 2022-23.