India’s foreign exchange reserves have surged by $5.17 billion to $696.66 billion for the week ended June 6, according to data released by the Reserve Bank of India (RBI) on Friday.
Key Highlights
- Foreign exchange reserves rose to $696.66 billion, a $5.17 billion increase from the previous week.
- The reserves are now close to the historic high of $704.885 reached at the end of September 2024.
- A strengthening of the reserves helps bolster the rupee vis-a-vis the US dollar.
For the week ending on June 6, foreign currency assets, a major component of the reserves, increased by $3.47 billion to $587.69 billion.
| Components of Foreign Exchange Reserves | Amount ($ billion) |
|---|---|
| Foreign Currency Assets | $587.69 billion |
| Gold | $85.89 billion |
| Special Drawing Rights | $18.67 billion |
Central banks worldwide are increasingly accumulating gold as a safe-haven asset in their foreign exchange reserves amid uncertainty created by geopolitical tensions.
“The gold reserves currently amount to $83.582 billion. The share of gold maintained by the Reserve Bank of India (RBI) in its foreign exchange reserves has almost doubled since 2021,” said RBI Governor Sanjay Malhotra.
India’s reserve position with the International Monetary Fund (IMF) was also up $14 million at $4.4 billion in the reporting week, according to the RBI figures.
India’s foreign exchange reserves stood at $691.5 billion in the preceding week that ended on May 30 and are sufficient to fund more than 11 months of goods imports and about 96 per cent of external debt outstanding.
Foreign exchange reserves refer to the foreign currency assets held by a country’s central bank, including foreign currency deposits, central bank deposits, and other assets denominated in foreign currencies.
The RBI Governor said: “Overall, India’s external sector remains resilient as key external sector vulnerability indicators continue to improve. We remain confident of meeting our external financing requirements.”
A strong forex kitty enables the RBI to intervene in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall.
With this surge, India’s foreign exchange reserves are now close to the historic high of $704.885 reached at the end of September 2024. A strengthening of the reserves helps bolster the rupee vis-a-vis the US dollar, which is a positive sign for the economy.
India’s economy has been performing well, and the surge in foreign exchange reserves is a reflection of its strong fundamentals. The RBI’s ability to stabilize the rupee and manage the economy effectively is crucial in maintaining the country’s economic stability.
With over $696.66 billion in foreign exchange reserves, India is well-equipped to handle any economic challenges that may arise in the future.
