India's Forex Reserves Fall by $2 Billion Amid Indo-Pak Tensions; Gold Holdings Decline Sharply ​​​​​​​

Amid rising tensions between India and Pakistan, India’s foreign exchange reserves saw a significant decline, ending an eight-week streak of consistent growth. As per the latest data from the Reserve Bank of India (RBI), the reserves dropped by $2.06 billion in the week ending May 2, bringing the total to $686.06 billion. In the previous week ending April 25, reserves had increased by $1.98 billion to reach $688.13 billion.

Mixed Movements in Reserve Components

The dip was largely attributed to a sharp fall in gold reserves, which declined by $2.55 billion, bringing the total gold holdings down to $81.82 billion.

Meanwhile, foreign currency assets (FCAs)—which constitute the largest portion of forex reserves—recorded a modest increase of $514 million, rising to $581.18 billion. FCAs include the value of major non-dollar currencies like the euro, pound, and yen, adjusted against the U.S. dollar.

The country’s Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) also fell by $30 million, standing at $18.56 billion.

Import Cover Still Strong

Despite the recent decline, the RBI has stated that the current level of reserves is sufficient to cover 10 to 12 months of imports, which is a key indicator of economic resilience.

Recent Reserve Trends

India’s forex reserves had touched a historic high of $704.89 billion in September 2023, before experiencing periodic fluctuations. During that time, the Indian rupee had reached a record low against the U.S. dollar, prompting RBI intervention to stabilize the currency market.

In contrast to the $71 billion fall in 2022, forex reserves rose by approximately $58 billion in 2023, showcasing the recovery and growth trajectory of India’s external financial position.