India’s foreign exchange reserves have surged by nearly USD 10 billion in a week, moving significantly closer to the record level touched earlier this year. According to the latest data released by the Reserve Bank of India (RBI) on Friday, the country’s forex reserves rose by USD 9.905 billion to USD 716.907 billion in the week ended August 14. The latest increase comes after an even sharper rise in the preceding week. For the week ended August 7, India’s overall foreign exchange reserves had climbed by USD 14.136 billion to USD 707.002 billion. The latest data underline a strong recovery in India’s external reserves after they came under pressure earlier this year amid heightened global uncertainty and volatility in the currency market.
Forex reserves remain close to record high
India’s forex reserves had reached an all-time high of USD 728.494 billion in the week ended February 27. However, the reserves declined over several subsequent weeks following the onset of the conflict in the Middle East.
The geopolitical developments put pressure on the Indian rupee and prompted the RBI to intervene in the foreign exchange market through dollar sales. The latest rise has now taken the reserves back above the USD 700-billion mark and within striking distance of their record level. At USD 716.907 billion, the reserves are around USD 11.6 billion below the February peak.
Foreign currency assets drive weekly rise
Foreign currency assets, which form the largest component of India’s forex reserves, accounted for a substantial part of the latest increase. The RBI data showed that these assets rose by USD 7.225 billion during the week to USD 581.851 billion. Foreign currency assets are reported in US dollar terms and also reflect changes in the value of major non-US currencies held as part of India’s reserves. Movements in currencies such as the euro, pound and Japanese yen can therefore influence the dollar value of these assets even when there is no corresponding change in the underlying holdings.
Gold reserves add further strength
India’s gold reserves also recorded a notable increase during the reporting week. Their value rose by USD 2.679 billion to USD 111.417 billion, providing another boost to the overall forex kitty.
The Special Drawing Rights (SDRs) component, however, declined marginally by USD 5 million to USD 18.74 billion, according to the central bank. India’s reserve position with the International Monetary Fund (IMF) moved in the opposite direction, increasing by USD 5 million to USD 4.899 billion at the end of the week.
Measures to attract more foreign exchange flows
The rise in reserves also comes against the backdrop of measures taken by the government and the RBI to encourage greater foreign exchange inflows into India. Last month, authorities introduced a series of measures aimed at attracting additional forex flows, including the FCN (B) measure. Under the concessional swap measures, India had received USD 56.85 billion as of August 13. These steps are aimed at strengthening the country’s external buffers and supporting the availability of foreign exchange at a time when global markets remain sensitive to geopolitical developments and currency movements.
What the latest forex data mean for India
Foreign exchange reserves serve as an important cushion for an economy by helping manage external shocks, supporting confidence in the domestic currency and meeting foreign exchange requirements. A larger reserve pool also gives the central bank greater room to respond to periods of sharp volatility in global financial markets. With reserves now at USD 716.907 billion, India has recovered a significant portion of the reserves lost after the February peak. The latest weekly jump suggests that the country’s external buffers remain robust, although the reserve position will continue to be influenced by currency movements, capital flows, global commodity prices and geopolitical developments.
(With inputs from PTI)
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