India's Forex Reserves Surge to $690.6 Billion, Highest in Seven Months
India's Forex Reserves Experience Significant Growth
India's foreign exchange reserves saw an increase of $4.553 billion, reaching a total of $690.617 billion for the week ending May 9, as reported by the Reserve Bank of India (RBI). This marks a notable recovery, considering the previous peak of $704.89 billion recorded in September 2024.
Following an eight-week streak of gains, the forex reserves experienced a decline before rebounding in the week ending May 9. Prior to this recent increase, the reserves had been on a downward trend for approximately four months. The latest data from the RBI indicates that India's foreign currency assets (FCA), which constitute the largest portion of the forex reserves, are valued at $581.373 billion.
Insights into India's Foreign Exchange Reserves
According to RBI statistics, the country's gold reserves are currently valued at $86.337 billion, having risen by an impressive $4.518 billion in the latest reporting week. Globally, central banks are increasingly adding gold to their reserves, and India is following this trend. Since 2021, the proportion of gold in the RBI's foreign exchange reserves has nearly doubled.
Current estimates suggest that India's forex reserves are adequate to cover around 10 to 12 months of anticipated imports. In 2023, the nation added approximately $58 billion to its reserves, contrasting with a total decline of $71 billion in 2022. The reserves saw a modest increase of just over $20 billion in 2024.
It's important to understand that forex reserves are assets held by a country's central bank or monetary authority, primarily in reserve currencies like the US Dollar, with smaller amounts in the Euro, Japanese Yen, and Pound Sterling.
The RBI plays a crucial role in managing liquidity, often intervening in the market by selling dollars to curb significant depreciation of the Rupee. The central bank strategically purchases dollars when the Rupee is strong and sells them when it weakens.