How Did India’s Forex Reserves Surge by $5.17 Billion?
Click to start listening
Synopsis
India's foreign exchange reserves have seen a remarkable increase of $5.17 billion, reaching a new total of $696.66 billion. This surge not only signals economic strength but also positions the country close to its historic high. Discover how these reserves impact the rupee and the broader economy.
Key Takeaways
- India’s forex reserves grew by $5.17 billion to $696.66 billion.
- Foreign currency assets increased by $3.47 billion.
- Gold reserves rose by $1.6 million to $85.89 billion.
- India's forex reserves can fund over 11 months of imports.
- The RBI is equipped to stabilize the rupee amidst volatility.
Mumbai, June 13 (NationPress) India's foreign exchange reserves have surged by $5.17 billion, reaching $696.66 billion as of the week ending June 6, according to data released by the RBI on Friday. This substantial increase has brought the country's forex reserves close to the historic peak of $704.885 billion achieved at the end of September 2024. A robust foreign exchange reserve enables the rupee to strengthen against the US dollar.
For the week concluding on June 6, foreign currency assets, a critical part of the reserves, saw an increase of $3.47 billion reaching $587.69 billion. In dollar terms, these assets reflect the fluctuations in value of non-US currencies such as the euro, pound, and yen within the foreign exchange reserves.
The gold holdings within the forex reserves have also risen by $1.6 million, bringing the total to $85.89 billion during the week. Central banks globally are increasingly investing in gold as a secure asset amidst the uncertainties stemming from geopolitical tensions. Currently, gold reserves amount to $83.582 billion, and the proportion of gold held by the Reserve Bank of India (RBI) in its forex reserves has nearly doubled since 2021.
The special drawing rights in the forex reserves increased by $102 million to reach $18.67 billion, as reported by the central bank. Additionally, India's reserve position with the IMF rose by $14 million to $4.4 billion during the reported week, according to RBI data.
Last week, RBI Governor Sanjay Malhotra noted that India's foreign exchange reserves stood at $691.5 billion in the previous week ending May 30, which is adequate to cover over 11 months of goods imports and about 96 percent of the outstanding external debt.
Malhotra stated, "Overall, India’s external sector remains resilient as key external sector vulnerability indicators continue to improve. We are confident in meeting our external financing needs."
An increase in foreign exchange reserves is indicative of strong economic fundamentals, providing the RBI with greater flexibility to stabilize the rupee during periods of volatility.
A robust forex reserve allows the RBI to step into the spot and forward currency markets, releasing additional dollars to avert a rapid decline of the rupee.
Point of View
I recognize that the increase in India's foreign exchange reserves reflects our nation's economic resilience. It's essential for maintaining stability and confidence in the rupee, especially in a volatile global market. The RBI's proactive measures demonstrate a commitment to safeguarding our financial landscape.
NationPress
14/06/2025
Frequently Asked Questions
What caused the increase in India's forex reserves?
The increase in India's forex reserves was primarily due to a rise in foreign currency assets and gold holdings, alongside the appreciation of non-US currencies.
How do forex reserves impact the Indian economy?
Forex reserves provide a buffer against external shocks, enhance investor confidence, and allow the RBI to intervene effectively in currency markets.
What is the significance of gold in forex reserves?
Gold acts as a safe-haven asset, and its increasing share in forex reserves reflects global central banks' strategies to hedge against uncertainties.
How much of India's imports can be covered by forex reserves?
India's forex reserves are sufficient to cover over 11 months of goods imports.
What is the current position of India's reserve with the IMF?
India's reserve position with the IMF has risen to $4.4 billion.
