India’s foreign exchange reserves are currently robust enough to cover approximately 90% of the nation’s external debt, which reached $711.8 billion as of September 2024, reflecting a strong buffer against external vulnerabilities, according to the Economic Survey 2024-25.
As of 2024, India ranks fourth globally in foreign exchange reserves, following China, Japan , and Switzerland.
The country’s reserves saw a significant increase of $27.1 billion during the year, driven by net positive capital inflows, with foreign currency assets (FCA) comprising the bulk of this rise.
Despite recently surpassing the $700 billion threshold, India’s forex reserves moderated to $640.3 billion by the end of December 2024.
The reserves include foreign currency assets, gold, special drawing rights (SDRs), and the reserve tranche position (RTP) in the International Monetary Fund (IMF), highlighting India’s strategic financial positioning on the global stage.
In terms of import cover, a crucial indicator of external sector stability, India reported a coverage of 10.9 months as of December 2024. This increase enhances the country’s ability to withstand external shocks, significantly surpassing the IMF’s recommended three-month import cover for emerging economies, said the survey.
India’s balance of payments (BoP) surplus of $63.7 billion in FY24, alongside a modest valuation gain of $4.3 billion, was instrumental in this improvement. In the first half of FY25, forex reserves rose by $59.4 billion, driven by a BoP surplus of $23.9 billion and a valuation gain of $35.5 billion, added the survey.
The global landscape of foreign exchange reserves has been subject to fluctuations due to rising uncertainty. Calendar year 2024 saw gold bullion holdings nearing their highest levels since World War II, primarily attributed to accumulation by emerging market central banks.
According to the survey, citing the IMF, significant changes are underway in the global reserve system, indicating a gradual shift away from dollar dominance and a rising role for non-traditional currencies.