Reserve Bank of India
India too will be hit if the eurozone turmoil and the Middle East unrest trigger a global slump.REUTERS/Danish Siddiqui

India's foreign exchange reserves declined for the second straight week in a row, according to the Reserve Bank of India's (RBI) weekly update released on Friday. The reserves dropped $1.43 billion to $348.93 billion as on 8 January, 2016.

The country's reserves fell in the previous week ending 1 January by $1.68 billion to $350.36 billion.

The reserves had declined by about $5 billion by the end of last year, from a record peak seen in mid-2015, mainly due to currency valuations and the apex bank's active intervention to check rupee volatility that limited the pace of accumulation, according to Radhika Rao -- economist, group research, DBS Bank. 

"Despite the modest pullback, the current stock is comfortable on domestic metrics, especially with regard to the import cover (10x) and adequacy to cover short-debt external debt levels," she wrote last week.

The sharp fall for the week ended 8 January was mainly due to a drop in foreign currency assets by $1.42 billion, according to the RBI's weekly supplement.

Gold reserves remained unchanged at $17 billion.

For the week ended 25 December, 2015, the reserves increased by $943 million to $352.04 billion.

Rupee at 28-month low

On Friday, the Indian rupee declined by 30 paise to close at a 28-month low of 67.60 against the US dollar, as fresh demand from importers amid large capital outflows put pressure on the local currency.

On Thursday, the rupee had closed at 67.30, a fall of 45 paise.

The rupee's all-time low is 68.85 registered on 28 August, 2013, when the currency plunged on fears of economic slowdown in India and worries of global volatility in global stock markets.

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