- After 3 consecutive years of rise, India’s forex reserves declined by $70 bn in 2022 on account of rising inflation and interest rates.
- The decline in the forex reserves is partly due to the RBI intervention in the currency markets to stave off volatility and partly on account of the depreciation of other major currencies held by the central bank.
- The RBI net sold $33.42 billion till September, Union finance minister Nirmala Sitharaman had said in the Lok Sabha earlier.
- The RBI holds major currencies including the pound sterling, yen, and euro in its reserves, which are expressed in US dollar terms.
- Holding forex reserves reduces the likelihood of BoP crises and helps preserve economic and financial stability against disordered market conditions.
- India’s Forex Reserves include- Foreign Currency Assets, Gold reserves, Special Drawing Rights, and a Reserve position with the IMF.
India’s foreign exchange reserves fell by $70.1 billion in 2022
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