MOHAMMAD ZIYAUDDIN
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India’s foreign exchange reserves saw a massive increase of $15.267 billion, reaching $653.966 billion in the week ending March 7, according to data from the Reserve Bank of India (RBI). This marks the sharpest weekly surge in over two years.
Previous Week's Reserves: Dropped by $1.781 billion to $638.698 billion.
Peak Reserves: The highest-ever forex reserves were recorded at $704.885 billion in September 2023.
What Led to This Surge?
The major jump in reserves can be attributed to the $10 billion forex swap conducted by the RBI on February 28. In this swap, the RBI purchased US dollars against the Indian rupee to:
Enhance banking system liquidity
Stabilize market conditions
Reduce currency volatility
Previously, the forex reserves had been declining due to RBI's market interventions aimed at curbing rupee volatility.
Breakdown of Forex Reserve Components
Foreign Currency Assets (FCA):
- Largest component of reserves.
- Increased by $13.993 billion to $557.282 billion.
- Fluctuations depend on major global currencies like the US dollar, euro, pound, and yen.
Gold Reserves:
- Increased by $1.053 billion to $74.325 billion.
Special Drawing Rights (SDRs):
- Rose by $212 million to $18.21 billion.
India’s Reserve Position with the IMF:
- Declined by $69 million to $4.148 billion.
What This Means for India’s Economy
Higher forex reserves strengthen India's economic stability.
Boosts confidence in the rupee and helps manage external debt.
Provides a buffer against global financial volatility.
With forex reserves bouncing back, RBI’s intervention strategy seems to be effectively balancing liquidity and currency stability, ensuring a strong economic outlook for India.
