India's foreign exchange reserves have witnessed a sustained weekly decline since the last week of February'22. Forex reserves have declined by nearly $14 bn or 3% in the five-week period, bringing down the reserves from a high of $632 bn to $ 618 bn. This is the lowest level in eight months (end August'21).

Insights: The decline in the foreign currency assets, which accounts for nearly 90% of the total forex reserves, has led to the moderation in the overall reserves. Foreign currency assets as of 26 Mar'22 stood at $550 bn which is a drop of 2.6% over five weeks. This decline can be put down to the outflow of foreign funds from the domestic capital markets following the turmoil in the global financial markets due to geopolitical tensions. It is also indicative of the central bank's intervention in the currency market to limit the depreciation of the Indian Rupee. The Indian rupee plunged to a record low of Rs. 77.02 against a US dollar on 7 March'22.

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