India’s foreign exchange reserves got depleted by another $8 billion in the week ended July 8, as foreign portfolio investors continued withdrawing their investments from local equities. The change in valuation of reserves held in other global currencies is also partly behind this significant depletion of reserves, forex dealers said.
The RBI announced steps to attract capital inflows on July 6, but the measures would take time to foreign currency demand-supply imbalance, economists said. The central bank on July 11 allowed the use of rupee for settlement of trade flows which is primarily aimed at reducing the demand for foreign exchange for settlement purposes and preventing the rapid depletion of forex reserves.
The reserves stood at $580.252 billion as of June 8, Reserve Bank of India data showed. Out of this, foreign currency assets stood at $518.089 billion while reserves held in gold were valued at $39.186 billion. The balance is kept with the International Monetary Fund as special drawing rights and reserves.
The fall in reserves now topped nearly $63 billion from its peak of $642.453 billion seen on September 3, last year. The central bank spent more than $52 billion to defend the currency since February.