India’s foreign exchange reserves fell to $553 billion. In August, India’s foreign exchange reserves fell sharply. The decline comes as the Reserve Bank of India struggles to overcome the rupee’s position against the strength of the dollar. This is the lowest level of India’s foreign exchange reserves in the last 23 months. The data show that all components of foreign exchange reserves declined over this period.
According to data released by the RBI, weekly foreign exchange reserves through September 2 stood at $553.1 billion, which is $7.94 billion less from the previous week, the lowest level since October 9, 2020. As of August 26, 2022, India’s foreign exchange reserves stood at US $561.04 billion.
Earlier this week, RBI Governor Shaktikanta Das said the central bank’s intervention in the foreign exchange market was intended not only to prevent excessive volatility, but also to contain expectations of a devaluation of the rupee. In 2022, the rupiah fell 6.6% against the dollar. The RBI has attracted significant reserves since Russia invaded Ukraine at the end of February.
Reason for falling forex reserves of India
India’s growing trade deficit(loss) is considered the main reason for India’s declining foreign exchange reserves. At the same time, the dollar continues to be sold by the RBI to maintain the value of the rupee against the strong dollar.
According to the Ministry of Finance, as of September 8, direct taxes collection in the country amounted to 6.48 billion rupees. This is 35.46% more than in the same period last year. During this period, corporate tax increased by 25.95%, and personal income tax – by 44.37%. Refunds of Direct tax also increased by 30.17% from last year to 5.2 lakh crore from the beginning of this year.