India’s Forex Reserves Near Record High, Rise to $676.3 Billion
In a strong sign of external sector stability, India’s foreign exchange reserves jumped by $10.8 billion, reaching $676.3 billion in the week ending April 4, according to data released by the Reserve Bank of India (RBI) on Friday.
Mumbai: In a strong sign of external sector stability, India’s foreign exchange reserves jumped by $10.8 billion, reaching $676.3 billion in the week ending April 4, according to data released by the Reserve Bank of India (RBI) on Friday.
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This marks the fifth consecutive week of gains, underlining a positive trend in the country’s external financial position.
Foreign Currency Assets and Gold Drive Surge in Reserves
The sharp rise in reserves was primarily driven by a $9 billion increase in foreign currency assets (FCAs), which now stand at $574.08 billion. Gold reserves also contributed significantly, rising by $1.5 billion to $79.36 billion—indicating strong central bank diversification amid global economic uncertainty.
Additionally, Special Drawing Rights (SDRs) increased by $186 million, bringing the total SDR holdings to $18.36 billion.
Reserves Climb After Period of Volatility and Revaluation Losses
The previous week ending March 28 had already seen a strong recovery with reserves rising by $6.6 billion to reach a five-month high of $665.4 billion. The recent momentum comes after months of decline attributed to revaluation losses and RBI interventions in the forex market aimed at containing rupee volatility.
India’s all-time high forex reserves were recorded in September 2024 at $704.89 billion.
Why Forex Reserves Matter: Economic Stability and Rupee Strength
A robust forex reserve position is crucial for India’s macroeconomic stability. It provides the RBI with the necessary buffer to intervene in currency markets, especially during periods of global turmoil or high volatility in the USD-INR exchange rate.
Higher reserves:
- Boost investor confidence
- Help stabilize the Indian rupee
- Provide coverage for import payments
- Strengthen India’s external debt repayment capacity
Conversely, declining reserves reduce the central bank’s ability to shield the rupee during economic stress.
India’s Trade Deficit Narrows to 3-Year Low
In a related development, India’s merchandise trade deficit narrowed significantly to $14.05 billion in February, down from $22.99 billion in January, according to the Ministry of Commerce and Industry.
The improvement came amid steady exports and a decline in imports, signaling resilience in India’s trade performance despite ongoing geopolitical tensions and global economic challenges.
