Who cast an evil eye on India's Forex reserves, 29 billion dollars reduced in 6 weeks

India Forex Reserve: The status of foreign exchange reserves in both South Asian countries, India and Pakistan, remains a topic of discussion these days. India's forex reserves have seen a decline for the sixth consecutive week, while Pakistan's reserves have registered a slight increase. Let us do a detailed analysis of the situation of both these countries.

Decline in India's foreign exchange reserves

India's foreign exchange reserves have been falling continuously in recent weeks. According to data from the Reserve Bank of India (RBI), the forex reserve fell by $6.48 billion to US$675.65 billion in the week ended November 8, 2024.

Major reasons for decline

Weakness of rupee:

The fall of rupee against the dollar has made imports expensive. India has to spend more dollars for oil, gas and other essential commodities, increasing pressure on reserves.

Fluctuations in the international market:

Factors such as global economic instability and the Federal Reserve's interest rate hike in the US have negatively impacted India's forex.

Decline in Gold and SDR:

A part of the foreign exchange reserves is held in foreign currency assets and gold reserves. There has also been a decline in this:

Foreign currency assets: Decrease of $ 4.47 billion

Gold reserves: Decrease of $ 1.94 billion

Decline from all-time high

India's foreign exchange reserves reached a historic high of $ 704.88 billion in September 2024. But in just 6 weeks it has decreased by $ 29.23 billion.

Increase in Pakistan's foreign exchange reserves

In contrast, Pakistan's forex reserves have seen a slight improvement. According to the State Bank of Pakistan (SBP), Pakistan's total foreign exchange reserves increased by $ 34 million to $ 15.966 billion in the week ended November 8, 2024.

Key reasons for the increase

SBP's contribution:

The reserves of the State Bank of Pakistan increased by $ 84 million.

Import controls:

The Pakistan government has imposed strict controls on imports and restrictions on certain items, which has saved foreign exchange.

International assistance:

In recent months, Pakistan has received assistance from international financial institutions and friendly countries, which contributed to the reserves.

Challenges remain

However, the foreign exchange reserves of Pakistan's commercial banks declined by $50 million. Moreover, the country's economic situation is still far from stability.

India and Pakistan: Comparative Analysis

Parameters India Pakistan

Forex reserves (November 8) $675.65 billion $15.966 billion

Recent change Decline of $6.48 billion Increase of $34 million

Peak level of reserves $704.88 billion (September 2024) $16.5 billion (2021)

Main reasons Rising imports and weakening of rupee Import controls and assistance

Conclusion

The foreign exchange position of India and Pakistan depends on their economic strategies and global conditions. India needs to improve its import-export balance, while Pakistan needs to maintain its economic stability and focus on long-term reforms. The timing is crucial for both countries, as foreign exchange reserves determine their economic health and role in international trade.