India’s Forex Reserves rebound after 8 weeks of decline amid global uncertainty
Maintaining robust forex reserves serves as a buffer against global economic shocks, safeguarding domestic stability.
India's foreign exchange (forex) reserves have seen a resurgence after an eight-week decline that pushed them to multi-month lows. According to data released by the Reserve Bank of India (RBI) earlier this week, reserves increased by USD 1.51 billion ( ₹12,788 crore), reaching USD 658.091 billion ( ₹55,703,821 crore) for the week ending November 29.
This recovery follows a sustained dip from September's all-time high of USD 704.89 billion ( ₹59,670,524 crore), largely attributed to the RBI's intervention in currency markets to curb excessive volatility and prevent sharp depreciation of the Rupee. Maintaining robust forex reserves serves as a buffer against global economic shocks, safeguarding domestic stability.
India's Current Reserve Composition
The latest figures reveal that foreign currency assets (FCA), the largest segment of India's forex reserves, stood at USD 568.852 billion ( ₹48,175,756 crore). Additionally, gold reserves were valued at USD 66.979 billion ( ₹5,674,874 crore).
India's Current Scenario
India's current reserve levels are sufficient to cover approximately one year of projected imports, offering a critical cushion for the economy. In 2023, the country added USD 58 billion ( ₹4,910,686 crore) to its reserves, marking a stark contrast to the USD 71 billion ( ₹6,010,557 crore) decline seen in 2022.
Foreign exchange reserves primarily consist of assets in major reserve currencies like the US Dollar, along with smaller holdings in the Euro, Japanese Yen, and British Pound. These reserves play a pivotal role in maintaining market stability.
RBI's Role in Forex Stability
The RBI has long adhered to a policy of strategic intervention in forex markets, focusing on preventing excessive fluctuations rather than maintaining a fixed exchange rate target. This involves measures such as selling dollars to curb sharp Rupee depreciation and buying dollars during periods of strength.
A decade ago, the Indian Rupee was one of Asia's most volatile currencies. Thanks to the RBI's active management, it is now among the region's most stable currencies, bolstering investor confidence in Indian assets.
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Business NewsEconomyIndia’s Forex Reserves rebound after 8 weeks of decline amid global uncertainty
First Published:8 Dec 2024, 10:28 AM IST
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