Foreign exchange reserves rebound after months of decline, bolstering economic stability
New Delhi, February 15: India’s foreign exchange reserves climbed for the third consecutive week, adding $7.65 billion to reach $638.261 billion for the week ending February 7, according to data released by the Reserve Bank of India (RBI) on Friday.
This positive momentum follows a prolonged decline, with reserves falling in 15 of the last 16 weeks, touching an 11-month low. The recovery comes amid RBI’s ongoing intervention in currency markets to stabilize the Indian Rupee.
Forex Reserves Recovery After a Prolonged Decline
India’s forex reserves had been on a downward trend since reaching an all-time high of $704.89 billion in September 2023, marking a 10% drop from its peak. The decline was largely attributed to RBI’s intervention in the currency market, aimed at preventing excessive depreciation of the Indian Rupee.
Despite the recent gains, the Indian Rupee remains near its all-time low against the US dollar, prompting concerns about external sector stability.
Breakdown of India’s Forex Reserves (As of February 7, 2024)
🔹 Foreign Currency Assets (FCA): $544.106 billion – The largest component of forex reserves.
🔹 Gold Reserves: $72.208 billion – A crucial asset backing India’s currency stability.
🔹 Other Reserve Assets: Comprising Special Drawing Rights (SDRs) and India’s reserve position with the IMF.
Forex Reserves Sufficient to Cover 11 Months of Imports
According to economic estimates, India’s current forex reserves can cover approximately 11 months of projected imports, ensuring a strong buffer against global economic uncertainties.
In 2023, India added nearly $58 billion to its reserves, reversing the $71 billion decline in 2022. In 2024, reserves have grown by over $20 billion so far, reinforcing India’s external financial position.
RBI’s Role in Managing Currency Fluctuations
The RBI actively manages liquidity by buying and selling US dollars to curb excessive fluctuations in the Indian Rupee.
- When the Rupee strengthens, the RBI buys dollars to build reserves.
- When the Rupee weakens, the RBI sells dollars to prevent sharp depreciation.
With the Rupee trading near record lows, the RBI’s intervention remains crucial in maintaining currency stability amid global economic shifts.
Looking Ahead: What’s Next for India’s Forex Reserves?
The resurgence in forex reserves signals a positive outlook for India’s economic resilience. However, global oil prices, geopolitical tensions, and US monetary policy decisions will continue to influence the Rupee’s trajectory and India’s reserve position in the coming months.
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India forex reserves, RBI forex data, Indian economy, Rupee vs Dollar, foreign exchange trends, RBI interventions, India trade balance, Indian gold reserves, import cover, global economy