
Foreign exchange reserves in India reached $638.698 billion during the week that ended on February 28 and hit an 11-month historical low. Recent weeks have shown that foreign exchange reserves increased or decreased because this week's drop totaled $1.781 billion. The Reserve Bank of India continues to work on stabilizing the Indian rupee, which remains under pressure near its historical all-time low against the US dollar, thus causing the reduction of the foreign exchange reserve.
The Forex reserves experienced a downward trend since hitting their highest level of $704.89 billion in September. India's Forex reserves registered an approximately 10% decrease compared to their peak in September. The Reserve Bank of India's direct actions to defend the value of the rupee against external market pressures have been identified by analysts being the main reason behind the depreciation. The RBI keeps the Rupee from devaluation by conducting foreign currency exchanges where they primarily trade US dollars.
Most Indian foreign currency holdings worth $543.350 billion represent India's largest reserve component. India's diverse Forex reserve structure reveals itself through the dual presence of $73.272 billion in gold reserves and $543.350 billion in foreign currency assets. The recent downward trends in foreign exchange reserves have not diminished their ability to cover anticipated imports for 10 to 11 months, thus protecting India from external economic shocks.
The recorded patterns of India's Forex reserves demonstrated inconsistent variations across 2023 and 2024 timespan. India grew its Forex reserves to about $58 billion in 2023 after experiencing an earlier $71 billion reserve drop in 2022. Moreover the annual increase in India's Forex reserves in 2024 reached $20 billion after a slight shift in data evaluation.
Annual changes reveal strength however fluctuations in reserves demonstrate the obstacles facing the nation in supporting stable foreign exchange positions considering worldwide unpredictable events. The Reserve Bank of India maintains critical control over foreign exchange reserves, which supports the stability of foreign currencies and defense against abrupt Rupee depreciation.
The Reserve Bank of India maintains the Indian Rupee exchange rate by strategically combining dollar purchases and sales in its Forex reserve management. The RBI performs dollar sales during Rupee weakening to prevent currency depreciation. When the national currency gains strength, the central bank buys dollars from the market to recharge foreign exchange reserves.
Most forex reserves are US dollar holdings but contain minimal portions of the Euro currency, Japanese Yen, and Pound Sterling. India's financial system benefits from multiple foreign exchange reserve holdings, reducing its vulnerability to unexpected economic disruptions.