NEW DELHI: India’s foreign exchange reserves increased by $4.546 billion, reaching $674.664 billion, just below their all-time high, during the week ending August 16, according to data released by the Reserve Bank of India (RBI) on Friday. The previous record high was $674.919 billion.
The reserves have been fluctuating for some time. In 2024 alone, they have risen by approximately $45-50 billion cumulatively. This buffer of foreign exchange reserves helps insulate domestic economic activity from global shocks.
According to the latest data from the RBI, India’s foreign currency assets (FCA), the largest component of forex reserves, rose by $3.609 billion to $591.569 billion.
Gold reserves during the week increased by $865 million, bringing the total to $60.104 billion. India’s foreign exchange reserves are now sufficient to cover more than 11 months of projected imports.
In the calendar year 2023, the RBI added about $58 billion to its foreign exchange reserves. In contrast, India’s forex reserves saw a cumulative decline of $71 billion in 2022.
Forex reserves, or foreign exchange reserves (FX reserves), are assets held by a nation’s central bank or monetary authority. These are generally held in reserve currencies, typically the US Dollar and, to a lesser extent, the Euro, Japanese Yen, and Pound Sterling.
The decline in forex reserves last year can largely be attributed to the rising cost of imported goods in 2022. Additionally, the relative fall in forex reserves may be linked to the RBI’s periodic interventions in the market to manage the uneven depreciation of the rupee against a surging US dollar.
The RBI frequently intervenes in the market through liquidity management, including the sale of dollars, to prevent a steep depreciation of the rupee.
The RBI closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions, aiming to contain excessive volatility in the exchange rate without reference to any pre-determined target level or band. (ANI)