India’s Forex Reserves Drop by $1.18 Bn to $695.49 Bn, Third Consecutive Weekly Decline

India’s foreign exchange reserves have dipped once again, with the latest Reserve Bank of India (RBI) data revealing a fall of $1.18 billion to $695.49 billion for the week ending July 18, 2025. This marks the third week in a row that the reserves have declined, reflecting volatility in the global financial landscape and policy interventions by the central bank.

Understanding the Numbers

• Forex Reserve Total (Week Ending July 18, 2025): $695.49 billion

• Change from Previous Week: Down by $1.18 billion

• Previous Week’s Reserves: $696.67 billion

• All-Time High: $704.89 billion (September 2024)

The decline is primarily due to a reduction in foreign currency assets, which dropped by $1.201 billion to $587.61 billion. Despite this, India’s gold reserves saw a modest increase of $150 million, rising to $84.49 billion. Conversely, Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) fell by $119 million to $18.68 billion. The reserve position with the IMF also edged down by $13 million to $4.70 billion.

What’s Driving the Decline?

1. Forex Market Interventions:
   The RBI frequently intervenes in currency markets, often selling US dollars to prevent sharp depreciation of the Indian rupee.

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6. Such interventions generally lead to a reduction in reserve assets.

7. Currency Fluctuations:
   Changes in the value of non-US currencies like the euro, pound, and yen—held as part of India’s reserves—can impact total reserve figures once converted to US dollars.

8. Global Economic Uncertainty:
   Persistent global headwinds, including shifting foreign capital, changing commodity prices, and a dynamic interest rate environment, have increased the need to actively manage forex reserves.

9. Gold as a Safe Haven:
   Despite the decline in overall reserves, India’s gold holdings have increased, reflecting a global trend where central banks are boosting their share of gold amid economic uncertainty.

Historical Context & Resilience

• Reserves at Historical Highs:
  India’s reserves peaked at $704.89 billion in September 2024, having grown by over $20 billion in 2024 and $58 billion in 2023, after a notable decline of $71 billion in 2022.

• Import Cover & External Debt:
  With the current reserves, India can cover 11 months of imports and has nearly 96% coverage of its external debt—a robust buffer by international standards.

• Gold’s Growing Share:
  The proportion of gold in India’s reserves has almost doubled since 2021, as global central banks prioritize gold as a safe-haven asset during turbulent times.

Implications for the Indian Economy

• Rupee Stability:
  Regular intervention by the RBI helps support the rupee, though it comes at the cost of drawing down foreign currency reserves. The stability of the rupee is crucial for importers, exporters, and foreign debt obligations.

• Investor Sentiment:
  A steady decline in reserves may influence investor confidence, especially if it signals persistent outflows or mounting external vulnerabilities. However, with substantial reserves remaining, immediate concerns are limited.

• Policy Response:
  The reserves’ decline highlights the importance of prudent macroeconomic management. Indian policymakers continue to monitor external vulnerabilities and maintain tools to address adverse global shocks.

Conclusion

The third consecutive weekly decline in India’s foreign exchange reserves underscores both the proactive role of the RBI in currency management and the pressures exerted by global economic forces. While this decline may raise eyebrows, India’s reserves remain at historic highs, providing a substantial safety net for external shocks and supporting the rupee amid global turmoil.