Mumbai, April 6:
India’s foreign exchange reserves recorded a sharp rise of USD 6.596 billion, reaching USD 665.396 billion for the week ending March 28, according to the latest data released by the Reserve Bank of India (RBI). This marks the biggest weekly gain in nearly five months, reflecting renewed investor confidence and strengthening economic fundamentals.
The surge comes after a period of volatility in the forex markets and follows a steady upward trend over the past three weeks. In total, India’s foreign exchange reserves have increased by USD 20.1 billion during this period.
RBI Reserves breakdown
As per the RBI’s weekly statistical supplement, the rise in reserves was driven mainly by an increase in foreign currency assets (FCA) and gold holdings.
Foreign Currency Assets (FCA) stood at USD 565.014 billion
Gold Reserves were valued at USD 77.793 billion
The remaining assets include Special Drawing Rights (SDRs) and India’s reserves with the International Monetary Fund (IMF)
FCA, which form the largest component of the total reserves, include investments in foreign government bonds, deposits with other central banks, and holdings in major global currencies such as the US Dollar, Euro, Pound Sterling, and Japanese Yen.
Rupee Appreciation Supports Reserve Growth
The forex gain coincided with a 0.6% appreciation in the Indian Rupee against the US Dollar during the same week. Analysts attribute this to renewed foreign investments in Indian equity markets, improved risk appetite, and easing global uncertainties.
Foreign exchange reserves play a crucial role in supporting the Rupee against volatility. The RBI actively intervenes in the currency markets to prevent sharp fluctuations—selling dollars when the Rupee weakens and buying dollars when it strengthens, thereby maintaining exchange rate stability.
Investor Confidence Returns
Experts suggest that the previous decline in reserves was linked to shaky investor sentiment and capital outflows from Indian equity markets. However, the recent surge signals a return of confidence, with increasing foreign portfolio investment (FPI) inflows and strong domestic economic indicators.
“The consistent build-up in reserves is a positive sign for India’s external sector. It reflects the RBI’s prudent strategy of accumulating reserves during periods of capital inflows and managing volatility effectively,” said a senior economist from a leading financial firm.
Import Cover and Economic Stability
According to official estimates, India’s current level of forex reserves is sufficient to cover 10 to 11 months of projected imports. This buffer is considered healthy and gives India a cushion against external shocks such as global oil price spikes, geopolitical tensions, or financial market instability.
A strong reserve position also helps in maintaining credit ratings, ensures smooth external debt repayments, and boosts investor confidence in India’s economic stability.
Annual Trends: From Decline to Recovery
India’s foreign exchange reserves have seen notable fluctuations in recent years. In 2022, reserves fell by USD 71 billion, mainly due to global uncertainties, high import bills, and central bank interventions to support the Rupee.
However, in 2023, the country saw a robust recovery, adding around USD 58 billion to its reserves. In the current year, 2024, the reserves have already grown by over USD 20 billion, with more gains expected if capital inflows continue.
What Are Forex Reserves?
Foreign exchange reserves are assets held by a country’s central bank in foreign currencies, gold, and other financial instruments. These reserves are used to stabilize the national currency, manage liquidity, and pay for imports or debt obligations when needed.
In India’s case, the reserves are managed by the RBI, which uses them strategically to balance macroeconomic stability, control inflation, and support the currency market.
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