Thursday, January 30, 2025
Thursday, January 30, 2025

India’s Forex Reserves Dip by 2.63%, Not the Steepest Decline in Two Decades: Government Clarifies

Minister of State for Finance points to 2008 global financial crisis as the period with the sharpest decline in forex reserves.

New Delhi, December 16: The government clarified on Monday that the recent dip in India’s foreign exchange reserves (FER) is significant but not the steepest in the nation’s history. During the week ending November 15, 2024, the reserves declined by 2.63% compared to the previous week.

Minister of State for Finance Pankaj Chaudhary, in a written reply to the Lok Sabha, stated that while this drop has sparked concerns, it pales in comparison to the sharpest decline in percentage terms over the past 20 years. The largest fall occurred during the global financial crisis in the week ending October 24, 2008, when the reserves plummeted by 5.65%.

ALSO READ

“For the week ended November 15, 2024, the Foreign Exchange Reserves (FER) decreased by 2.63% vis-à-vis the previous week. However, in percentage terms, the highest decline in the last 20 years was observed in the week ending October 24, 2008,” the Minister noted.

Factors Behind the Decline

The current pressure on India’s forex reserves and the rupee has been attributed to several domestic and external factors, including:

  • Capital outflows.
  • Fluctuations in the dollar index.
  • Rising global interest rates.
  • Increasing crude oil prices.

These factors have collectively created a challenging environment for the Indian rupee.

Rupee Value Market-Determined

The government reiterated that the value of the Indian rupee is market-determined and not pegged to any specific target or band. Factors such as capital flows, the dollar index, crude oil prices, interest rate levels, and the current account deficit play a critical role in influencing the rupee’s exchange rate.

“The value of the Indian Rupee (INR) is market-determined, with no target or specific level or band,” the Minister emphasized.

Role of the Reserve Bank of India

The Reserve Bank of India (RBI) has been actively intervening in the forex market to curb excessive volatility and ensure financial stability. The government assured that appropriate mechanisms are in place to address undue fluctuations.

The clarification by the government aims to reassure stakeholders about the current forex reserve situation, highlighting that the decline is manageable and far from unprecedented.

Related Articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Reviews