India’s foreign exchange (forex) reserves depleted by $28.03 billion during the financial year 2022-23 as the Reserve Bank of India (RBI) sold dollars to prevent sharp volatility in rupee that stemmed from the Russia-Ukraine conflict, global headwinds and Hindenburg’s allegation of malpractice in Adani Group.
The country’s forex reserves, which stood at $606.47 billion on 1 April 2022, the beginning of the fiscal 2022-23, slumped to $578.44 billion on March 31, 2023, posting a decline of $28.03 billion during the year, as per the latest data by the central bank.
India’s forex reserves touched the record high of $642.45 billion on 3 September 2021. As on 31st March 2023, the end of the fiscal 2022-23, the country’s forex kitty was down by $64.01 billion when compared with its record high.
The fiscal 2022-23 started on a volatile note due to the Russia-Ukraine conflict. A sharp jump in oil prices put pressure on the Indian currency forcing the RBI to sell dollars from the reserve.
Volatility continued during the year due to geopolitical tensions in Europe. In January 2023, US-based short seller Hindenburg Research released a report that accused Adani group of brazen stock manipulation and accounting fraud.
This led to a huge slump in Adani group stocks, creating volatility in stock markets and putting pressure on the rupee as foreign investors pulled money from the Indian equities. The RBI was again forced to sell dollars to prevent the rupee from slipping below 83 against the US currency.
India’s foreign currency assets, the biggest component of the forex reserves, dropped from $539.72 billion on 1 April 2022 to $509.69 billion recorded on 31 March 2023, registering a decline of $30.03 billion.
Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US currencies like pound, euro and yen held in the forex reserves.
The value of gold reserves rose during the year led by a surge in the price of the precious metal in the global markets.
As per the weekly statistical supplement released by the RBI on Friday, the forex reserves declined by $329 million during the week ended March 31.
The weekly drop was largely due to depletion in the value of gold reserves. The value of gold reserves fell by $279 million to $45.20 billion during the week. The value of gold reserves at the end of the fiscal was higher by $2.47 billion when compared with $42.73 billion recorded on 1 April 2022.