In a significant development, India’s foreign exchange reserves rose from $6.596 billion to $ 665.396 billion in the week that ended on March 28, extending gains for the fourth straight week, official data released by RBI showed. This significant jump is the highest in nearly five months, after witnessing a period of downturn.
According to RBI data, forex reserves have increased cumulatively by $20.1 billion over the past three weeks and by about $ 6.6 billion in the latest reporting week. Experts believe the declines in the last few weeks were caused by foreign investors’ shaken confidence in Indian equity markets. The data shows that the gold reserve, as of March 28, stood at $77.793 billion, while the foreign currency assets were at $ 565.014 billion.
On the other hand, the Rupee, during the same period, appreciated by 0.6 per cent against the US dollar. The appreciation of the Rs is seen as the renewed confidence of foreign investment in the Indian stock markets. Any decline in reserves is most likely due to RBI intervention, aimed at preventing a sharp depreciation of the Rupee.
Official estimates of the RBI suggest that India’s foreign exchange reserves are sufficient to cover approximately 10-11 months of projected imports.In 2023, India added around $ 58 billion to its foreign exchange reserves, contrasting with a cumulative decline of $ 71 billion in 2022. In 2024, the reserves rose by a little over $ 20 billion.
Foreign exchange reserves, or FX reserves, are assets held by a nation’s central bank or monetary authority. They are primarily in reserve currencies such as the US Dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling. The RBI often intervenes by managing liquidity, including selling dollars, to prevent steep Rupee depreciation. The RBI strategically buys dollars when the Rupee is strong and sells when it weakens.