India’s foreign exchange reserves rose by USD 1.983 billion to reach USD 688.129 billion in the week ending 25 April, marking the eighth consecutive weekly rise, according to data released by the Reserve Bank of India (RBI).
Despite the sustained gains, the reserves still remain below the all-time high of USD 704.885 billion recorded in September last year.
Foreign currency assets (FCAs), which form the largest portion of the forex reserves, grew by USD 2.168 billion to reach USD 580.663 billion. FCAs include the effect of appreciation or depreciation of non-US currencies such as the euro, pound, and yen held in reserves and are expressed in dollar terms.
In contrast, the country’s gold reserves saw a marginal decline of USD 207 million, bringing the total down to USD 84.365 billion for the week under review.
The value of India’s Special Drawing Rights (SDRs), held with the International Monetary Fund (IMF), rose by USD 21 million to stand at USD 18.589 billion.
The previous week, which ended on 18 April, had seen a more substantial gain of USD 8.310 billion, lifting the reserves to USD 686.145 billion.
India’s forex reserves had earlier fallen from their peak in September, mainly due to the central bank’s active intervention in currency markets to shield the Rupee from sharp depreciation. The Indian Rupee currently hovers near its historical low against the US dollar.
The RBI uses its reserves to manage exchange rate volatility, often buying dollars when the Rupee is strong and selling them during periods of weakness.
Estimates by the RBI suggest that the country’s current reserves are adequate to cover 10 to 12 months of projected imports.
In calendar year 2023, India had added around USD 58 billion to its reserves, offsetting a decline of USD 71 billion in 2022. So far in 2024, the reserves have grown by over USD 20 billion.
Foreign exchange reserves, or FX reserves, are held in various foreign currencies — primarily the US dollar, but also in euros, pounds, and yen — and serve as a crucial buffer to stabilise the economy during financial shocks.