India's forex reserves decline for second week in a row to $616.14 billion

Forex reserves: India's foreign exchange reserves declined for the second consecutive week, falling by $2.79 billion to $616.14 billion for the week ending on January 19, 2024, according to data released by the Reserve Bank of India (RBI).

The decline in reserves comes amid a strengthening Dollar and rising global oil prices. The Dollar has gained against most major currencies in recent months, as investors have sought safe-haven assets amid concerns about the global economy. Oil prices have also risen in recent months, as demand has recovered from the pandemic and supply has been constrained by production cuts from OPEC and its allies.

The decline in reserves is not a major concern, as India's reserves are still at a comfortable level. The RBI has enough reserves to cover about 9 months of imports, which is the highest level in history.

However, the decline in reserves does raise some concerns about India's external vulnerability. If the Rupee continues to depreciate or if oil prices continue to rise, India's reserves could come under further pressure.

The RBI is likely to continue to intervene in the foreign exchange market to support the Rupee. The RBI has already intervened in the market several times in recent months to sell Dollars and buy Rupees.

The RBI is also likely to take steps to attract foreign investment. The RBI has recently announced several measures to liberalise the foreign exchange market and make it more attractive for foreign investors.

Here are some of the reasons why India's foreign exchange reserves have declined in recent months:

• Strengthening Dollar: The Dollar has gained against most major currencies in recent months, as investors have sought safe haven assets amid concerns about the global economy.
• Rising oil prices: Oil prices have risen in recent months, as demand has recovered from the pandemic and supply has been constrained by production cuts from OPEC and its allies.
• Widening current account deficit: India's current account deficit has widened in recent months, as imports have risen faster than exports.
• Outflows of foreign investment: Foreign investors have sold Indian stocks and bonds in recent months, as they have become more risk-averse.