India Forex Reserve Reduces By Almost $1.5 Billion, Leaving Many in Parliament Concerned
According to reports from the Reserve Bank of India, the country’s foreign reserves have fallen considerably. The total drop is equal to $1.494 billion, leaving the country with $575.27 billion in foreign reserves.
While the country happens to be doing a lot better than some of its neighbours, given the size of the country, it might not be enough when things go downhill.
Another reason why many are not as concerned about the foreign reserves falling so much is that they had been climbing for nearly three weeks, finally coming to an end with the newest reporting period.
In the previous period, the total reserves in the country had managed to rise by $3.03 billion, bringing the total reserves available to $576 billion. While this might seem like a lot, the truth is that India had significantly more in its reserves.
In October of 2021 alone, reserves for the country were as high as $645 billion, reaching an all-time high. But in the proceeding year, global events led to India spending a big chunk of that foreign reserve money to maintain the rupee.
Foreign Currency Assets Specifically were Dropping
While the forex reserve has seemed to drop, it is made up of a variety of assets that the country holds, which can include foreign currency and even gold.
But by looking, the statistical analysis that the Reserve Bank of India provided showed that the foreign currency assets were the ones dwindling. While they happen to make up a large chunk of a country’s reserves, they are not the only thing in it.
These currency reserves happened to fall by $1.32 billion, which were mainly fluctuating because of different prices for different currencies continuously fluctuating.
Despite a country’s foreign currency reserves often being made completely of US dollars, other currencies can have an effect on its price as well. More specifically, currencies like the yen, euro, and pound can affect the country’s foreign reserve.
With Currencies like the yen and the pound currently being in complete flux, many are expecting the price of these assets to drop even further. As a result of the drop in prices, the overall foreign reserve is dropping.
Along with the drop in the price of foreign currency assets, there was also a drop in gold reserves for the country, which also contributed to the overall decline in prices.
Gold reserves happen to fall by as much as $246 million, lowering the total gold reserves that the country has to just $43.8 billion, which is not bad considering the string of continuous rises from the country as well.
In a Much Better State than Neighboring Countries
Along with being a country that is fairly well prepared in terms of its foreign reserves, it happens to be doing a lot better than some of its neighboring countries, namely Pakistan.
The Islamic Republic is facing a financial crisis that is threatening to leave the entire country defaulted. With a little less than $3 billion to the entire country’s foreign reserves, reports state that it only has enough to afford three weeks’ worth of imports in the country.
While the country has applied for a loan from the IMF following this serious rise in inflation and loss of forex reserves, its bad history of repaying loans has put it in a precarious position.
The country will have to generate tens of billions of dollars if it is to save itself from possibly falling into bankruptcy.
India’s Continued Effort
Of course, simply sustaining the financial reserve that the country has is not enough for India, as it is looking for more ways to possibly improve its financial standing and keep afloat in these precarious times.
With nearly three continuous weeks of increase to the forex reserve, it is sufficient to say that India is not worried about possibly surviving through this difficult time.
