According to the RBI’s Weekly Statistical Supplement, foreign currency assets (FCAs) increased by $10.4 billion, bringing the total to $616 billion. These FCAs, expressed in dollar terms, reflect the impact of fluctuations in the value of other currencies such as the euro, pound, and yen held in India’s forex reserves.
In addition to this, gold reserves saw a notable rise of $2 billion, reaching $65.7 billion. Special Drawing Rights (SDRs) experienced a modest increase of $8 million, now standing at $18.547 billion. However, India’s reserve position in the International Monetary Fund (IMF) witnessed a slight decrease of $71 million, settling at $4.3 billion for the week.
The rise is attributed to a combination of dollar purchases by the RBI and positive valuation adjustments.
With this achievement, India joins the ranks of only three other economies—China, Japan, and Switzerland—that have crossed the $700 billion threshold in reserves. The country has been steadily building its forex reserves since 2013, a response to capital outflows during periods of weak economic fundamentals.
Factors such as strict inflation control, robust economic growth, and improved fiscal and current account balances have contributed to the influx of foreign capital.
“The rise includes surges in foreign currency assets and gold reserves, while SDRs increased and the IMF reserve position fell slightly. The surging reserves have been facilitated by overseas inflows into India’s stocks and bonds,” said Manoranjan Sharma, Chief Economist, Infomerics Ratings.
So far in 2024, foreign inflows have reached approximately $30 billion, primarily driven by investments in local debt after their inclusion in a key J.P. Morgan index. Notably, India’s forex reserves have increased by $87.6 billion this year alone, outpacing last year’s total increase of nearly $62 billion.
“India’s forex reserves have been on an upswing since 2013, when India was part of the “fragile five” part category and foreign investors exited because of weak macroeconomic fundamentals. Since then, an effective check of the inflationary spiral, accelerated economic growth, squeezing of fiscal and current account deficits, and abiding faith in the India growth story have led to a surge of foreign funds,” Sharma added.
The recent rise in reserves was bolstered by the RBI’s dollar purchases of $4.8 billion, alongside $7.8 billion in valuation gains attributed to declining U.S. Treasury yields, a weakening dollar, and rising gold prices.
As the rupee strengthened past 83.50 to the dollar, the RBI has actively intervened in the currency market to maintain stability, making the rupee one of the least volatile currencies among its emerging market peers.
Looking ahead, India’s forex reserves are projected to grow further, with forecasts from Bank of America suggesting that they could rise to $745 billion by March 2026. This increase would provide the RBI with greater flexibility and influence over the rupee’s valuation in the global currency markets.