Sources of Variation in India’s Foreign Exchange Reserves during April-June 2026
Distilled Policy Brief
- On a balance of payments basis, India's foreign exchange reserves decreased by US$ 8.1 billion during April-June 2026 compared to an accretion of US$ 4.5 billion during April-June 2025.
- Nominal foreign exchange reserves decreased by US$ 22.5 billion during April-June 2026 due to a valuation loss of US$ 14.4 billion driven by lower gold prices and US dollar appreciation.
⚖️ Mains Analytical & Syllabus Linkages
Analyze the factors influencing the fluctuations in India's foreign exchange reserves, including balance of payments and valuation effects.
🎯 UPSC Prelims Practice Drill
With reference to the variation in India's foreign exchange reserves during the period April-June 2026, consider the following statements: 1. On a balance of payments basis (excluding valuation effects), India's foreign exchange reserves recorded a decrease during April-June 2026. 2. The nominal decrease in foreign exchange reserves was exclusively driven by current account deficit without any valuation impact. Which of the statements given above is/are correct?
- [A] 1 only
- [B] 2 only
- [C] Both 1 and 2
- [D] Neither 1 nor 2
▶ Reveal Official Answer & Analytical Explanation
Statement 1 is correct because, on a balance of payments basis (excluding valuation effects), India's foreign exchange reserves decreased by US$ 8.1 billion during April-June 2026. Statement 2 is incorrect because the nominal decrease in reserves (US$ 22.5 billion) was significantly influenced by valuation losses amounting to US$ 14.4 billion, driven by lower gold prices and the appreciation of the US dollar, rather than being exclusively driven by the current account without valuation impact.
🏛️ Historical Twin PYQ Anchor (2021)
Consider the following statements regarding the "National Clean Air Programme (NCAP)": 1. It is implemented by the Ministry of Environment, Forest and Climate Change. 2. Central Pollution Control Board acts as the sole regulatory executive body.