For How Many Months Indian Forex Reserves Can Cover Imports? RBI Shares

India's foreign exchange reserves (Forex) are sufficient to meet the more than 11 months of imports and about 96 per cent of external debt outstanding at end-June 2024, stated the Reserve Bank of India (RBI) on Tuesday.

In its bulletin, the central bank stated that the forex reserves increased by $6.4 billion during 2024-25 so far to $652.9 billion on December 13, 2024.

The RBI added in the bulletin that the country's "foreign exchange reserves remained robust" as reflected in sustainable levels of reserve adequacy metrics.

This comes after India's forex reserves have slumped ten out of the past 11 weeks, hitting a new multi-month low.

Decline In Foreign Exchange Reserves 

In the week that ended December 13, the foreign exchange kitty declined by $1.988 billion to $652.869 billion, data from the Reserve Bank of India (RBI) showed Friday.

The reserves had been falling ever since it touched an all-time high of $704.89 billion in September.

The reserves have been declining likely due to RBI intervention aimed at aggressively preventing a sharp depreciation of the Rupee. A substantial foreign exchange reserve buffer also helps shield domestic economic activity from global shocks.

The latest RBI data showed that India's foreign currency assets (FCA), the largest component of forex reserves, stood at $562.576 billion.

In 2023, India added around $58 billion to its foreign exchange reserves, contrasting with a cumulative decline of $71 billion in 2022.

What Are Foreign Exchange Reserves? 

Foreign exchange reserves, or FX reserves, are assets held by a nation's central bank or monetary authority, primarily in reserve currencies such as the US Dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling.

The RBI closely monitors foreign exchange markets, intervening only to maintain orderly market conditions and curb excessive volatility in the Rupee exchange rate, without adhering to any fixed target level or range.

The RBI often intervenes by managing liquidity, including selling dollars, to prevent steep Rupee depreciation.

A decade ago, the Indian Rupee was among the most volatile currencies in Asia. Since then, it has become one of the most stable. The RBI has strategically bought dollars when the Rupee is strong and sold when it weakens, enhancing the appeal of Indian assets to investors.