The country’s foreign exchange reserves declined by $711 million to $681.61 billion in the week ending June 5. This information has been given by the Reserve Bank of India (RBI). In the previous week, forex reserves had increased by $938 million to $682.32 billion. However, this time there has been a slight decrease in the total reserves.
According to RBI data, the largest part of forex reserves is foreign currency assets (FCA). In the week under review, FCA declined by $2.704 billion to $543.44 billion. Apart from the dollar, FCA also includes the effect of price fluctuations of other foreign currencies like euro, pound and yen. For this reason, sometimes changes in reserves are seen only due to changes in currency value.
Gold reserve gave relief
While foreign currency assets declined, India’s gold reserves showed strength. During this period, the value of gold reserves increased by $ 1.97 billion to $ 114.57 billion. Gold reserves are considered an important part of the financial security of any country, because gold is considered a safe investment in times of global uncertainty.
Increase in SDR and IMF reserve positions
The value of Special Drawing Rights (SDR) of the International Monetary Fund (IMF) also increased by $ 18 million to $ 18.765 billion. Apart from this, India’s reserve position with IMF stood at $4.826 billion. This is definitely a small part of the forex reserve, but it has its own importance in the international financial system.
Why is Forex Reserve important?
Forex reserves are considered a major indicator of the external economic strength of a country. It is used to pay for imports, meet foreign debt responsibilities and to keep the currency market stable when the rupee fluctuates significantly. Reserves of more than $681 billion provide India with strong financial security amid global economic uncertainties.
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