Foreign Exchange Reserves Dwindle as Gold Reserves Soar

India's foreign exchange reserves have experienced a decline, dipping by $4.1 billion to $640.28 billion as of December 27, 2024, according to data from the Reserve Bank of India (RBI). This decline follows a decrease of $8.4 billion in the previous week, ending December 20, when the reserves stood at $644.39 billion. The foreign exchange reserves have achieved notable milestones, including surpassing the $700 billion mark for the first time in history.

The main factor contributing to this drop was the reduction in Foreign Currency Assets (FCAs), which fell by $4.6 billion, bringing the total FCA amount to $551.92 billion. However, India's gold reserves saw an increase of $541 million, rising to $66.26 billion. Additionally, Special Drawing Rights (SDRs) declined by $12 million to $17.87 billion, while the reserve position in the International Monetary Fund (IMF) remained unchanged at $42.17 billion.

Despite these fluctuations, India has continued to strengthen its economic position globally, maintaining its position as the fourth-largest holder of foreign exchange reserves, following China, Japan, and Switzerland. India's economic rise is particularly remarkable given its past association with the "Fragile Five" emerging markets. Today, India has not only become the fifth-largest economy in the world but is also recognized as the fastest-growing major economy. The Reserve Bank of India plays a crucial role in managing these reserves, often intervening in the currency markets to stabilize the rupee and prevent sharp depreciation.