India's Forex Reserves Experience Largest Increase in Two Years
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Synopsis
India's forex reserves have seen a significant increase of $15.267 billion in early March following a $10 billion forex swap by the central bank. This marks the largest rise in two years, indicating a recovery in economic momentum.
Key Takeaways
- $15.267 billion rise in forex reserves.
- Central bank's $10 billion forex swap.
- Record high of $704.885 billion in September 2024.
- Capital expenditure ratio projected to improve.
- India expected to remain the fastest-growing major economy.
New Delhi, March 16 (NationPress) Following the $10 billion forex swap executed by the central bank on February 28, which involved purchasing dollars against the rupee to enhance liquidity, the nation’s foreign exchange reserves witnessed a remarkable increase of $15.267 billion for the week concluding on March 7.
This surge marks the most significant jump in over two years.
The forex reserves reached a record high of $704.885 billion in September 2024.
Foreign currency assets, a crucial part of the reserves, rose by $13.993 billion to $557.282 billion. In dollar terms, these foreign currency assets reflect the impact of appreciation or depreciation of non-US currencies such as the euro, pound, and yen held in the forex reserves.
The Special Drawing Rights (SDRs) increased by $212 million to $18.21 billion. However, India's reserve position with the IMF declined by $69 million, bringing it to $4.148 billion for the week, as reported by the RBI data.
Moreover, high-frequency indicators suggest a sequential improvement in India's economic activity momentum during the second half of 2024-25, which is expected to continue, according to the latest RBI monthly bulletin.
In a challenging and ever-changing global landscape, the Indian economy is set to maintain its status as the fastest-growing major economy during 2025-26, per IMF and World Bank GDP growth projections of 6.5 percent and 6.7 percent, respectively, as highlighted in the report.
The report also indicates that the Union Budget for 2025-26 wisely balances fiscal consolidation with growth goals, emphasizing ongoing capital expenditure alongside initiatives to enhance household incomes and consumption.
The effective capital expenditure to GDP ratio is projected to rise to 4.3 percent in 2025-26 from 4.1 percent in the revised estimate for 2024-25.
High-frequency indicators indicate that the economy is on a recovery trajectory during the second half of 2024-25 after experiencing a slowdown in the first half.
