Winning Bizness Desk

Mumbai. India's foreign exchange reserves have dropped for the 8th week in a row, raising concerns. According to data released by the Reserve Bank of India (RBI) on Friday, the reserves fell by $1.31 billion during the week ending November 29, bringing the total to $656.58 billion. This decline follows a sharp drop in the previous week ending November 22, when reserves fell by a record $17.76 billion, reaching $657.89 billion. India's forex reserves had peaked at an all-time high of $704.88 billion at the end of September but have been steadily declining since then.

Why Are Forex Reserves Falling?

RBI data shows that the main component of the reserves, foreign currency assets (FCA), dropped by $3.04 billion during the week ending November 22, now standing at $566.79 billion. FCA reflects holdings of currencies like the euro, pound, and yen, and their values fluctuate based on exchange rate movements against the U.S. dollar. However, during the same week, India's gold reserves increased by $1.83 billion, reaching $67.57 billion. Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) fell by $79 million, totaling $17.98 billion, while India’s reserve position with the IMF declined by $15 million to $4.23 billion.

Fiscal Deficit at 46.5% of Annual Target

India’s fiscal deficit for the first seven months of the financial year 2024-25 reached 46.5% of the full-year target, as per data released on Friday. The deficit during April-October stood at Rs 7,50,824 crore. Fiscal deficit refers to the gap between the government’s revenue and expenditure. In comparison, during the same period last year, the deficit was 45% of the annual target.

Pakistan's Reserves Show Growth

In contrast to India's declining reserves, Pakistan’s foreign exchange reserves have grown by $2.2 billion, as reported by the State Bank of Pakistan. This brings Pakistan's total forex reserves to $13.1 billion, marking a significant rise since July.

Key Takeaway

The steady decline in India’s forex reserves, despite an increase in gold holdings, raises questions about external financial pressures, exchange rate fluctuations, and global economic conditions. Meanwhile, Pakistan’s recent growth in reserves highlights contrasting trends in South Asia's economic landscape.