By Admin 
India Forex Reserve: According to the latest data released by the Reserve Bank of India, the country’s foreign exchange reserves have strengthened with an increase of $ 1.08 billion. However, during this period a decline was recorded in the gold reserve, which has attracted the attention of many people. In such a situation, the question arises that when the total foreign exchange reserves are increasing then why has the gold reserves decreased? Let us understand this in detail.
How much did foreign exchange reserves increase?
According to RBI’s weekly data, India’s foreign exchange reserves have increased by $ 1.08 billion to a higher level than last week. Foreign exchange reserves are considered an important indicator of the economic strength of any country, because it is used in imports, payment of foreign debt and keeping the currency exchange rate stable.
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How are foreign exchange reserves created?
India’s foreign exchange reserves are mainly divided into four major parts. This is divided into foreign currency assets, gold reserves, special drawing rights, reserve positions in the IMF. Depending on the changes in all these, the total foreign exchange reserves increase or decrease.
What is the reason for reduction in gold reserves?
Despite the increase in foreign exchange reserves, there could be many reasons behind the decline in gold reserves. From here you can see some special reasons-
1. Fall in gold prices
RBI calculates its gold reserves on the basis of gold prices in the international market. If gold prices fall in the global market, even though the quantity of gold with RBI remains the same, its dollar value reduces. This shows a decline in the gold reserve.
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2. Changes against the dollar
Foreign exchange reserves data is released in US dollars. If there is a change in the value of other currencies or gold compared to the dollar, it also affects the valuation of the reserve.
Why is increasing currency reserves good news?
Increase in foreign exchange reserves is considered a positive thing for the country’s economy. It has many benefits, such as strengthening the capacity to pay imports and helping in reducing pressure on the rupee. At the same time, the confidence of foreign investors increases and the country gets financial security during global economic uncertainty. Not only this, it is easy to repay external debt.
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Is reduction in gold reserves a matter of concern?
There is no need to worry based on only one week’s data. If the decline is only due to valuation, then it is considered part of the normal process. In the long run, RBI continuously maintains a balance between its gold reserves and foreign exchange reserves.