New Delhi: India’s foreign exchange reserves have reached an unprecedented milestone, crossing the $700 billion mark for the first time in history. Data released by the Reserve Bank of India (RBI) on Friday indicates that the reserves swelled by $12.588 billion to hit $704.885 billion in the week ending September 27.
In the previous week, the reserves stood at a then-record high of $692.296 billion. This substantial accumulation serves as a financial buffer, insulating the country’s economy from global economic shocks and enhancing its financial stability.
According to the latest RBI figures, the foreign currency assets (FCA)—the largest component of the forex reserves—were valued at $616.154 billion. Additionally, India’s gold reserves are currently worth $65.796 billion. Experts estimate that the current reserve levels are sufficient to cover more than a year of the country’s projected imports.
So far in 2023, India has bolstered its forex reserves by approximately $58 billion. This marks a significant recovery compared to 2022, when the reserves saw a cumulative decline of $71 billion.
Foreign exchange reserves are assets held by a nation’s central bank or monetary authority, typically in major reserve currencies like the US Dollar, Euro, Japanese Yen, and British Pound Sterling. These reserves play a critical role in ensuring a country’s economic stability and its ability to manage external shocks.
The RBI actively monitors foreign exchange markets, intervening as needed to maintain orderly conditions and to curb excessive volatility in the exchange rate. These interventions are carried out without adhering to any predetermined target level or exchange rate band.
The central bank often engages in liquidity management strategies, including the buying and selling of dollars, to prevent sharp depreciation of the Indian Rupee. A decade ago, the rupee was among the most volatile currencies in Asia. However, strategic interventions by the RBI—such as purchasing dollars when the rupee is strong and selling when it is weak—have transformed it into one of the region’s most stable currencies. A less volatile rupee makes Indian assets more attractive to investors, offering better performance and greater predictability.
