According to the Reserve Bank of India (RBI), India's foreign exchange reserves increased by $4.8 billion to $702.78 billion at the end of the week ending June 27. This rebound is against last week's decline, in which the reserves fell to $697.93 billion.
The growth was prompted mainly by a $5.75 billion increase in the foreign currency assets (FCAs), which is the largest constituent of the forex reserves. As of June 27, FCAs were at $594.82 billion. Foreign currency assets are investments in major currencies such as the US dollar, euro, yen, and pound and signify the investments made by the RBI in international securities and deposits.
Though the total reserves went up, India lost $1.23 billion in gold reserves as of the same week, bringing the total to $84.5 billion. The drop is despite a world trend in which most central banks continue to buy gold for their reserves as a hedge against market uncertainties and currency shocks.
In the last few years, India has raised its gold reserves significantly. The proportion of gold in the country's forex holding almost doubled between 2021 and 2024. Between 2023 and 2022 alone, the government increased its reserves by $58 billion after cutting them by $71 billion in 2022. The consistent increase points to the particular attention paid by the RBI to ensuring that the reserve mix is diversified in terms of risk and return.
According to RBI Governor Sanjay Malhotra, India has foreign exchange reserves enough to finance about 11 months' imports and almost 96% of the country's total foreign debt. In the latest Monetary Policy Committee release, he stated that the external sector had not been adversely affected and that some of the indicators of vulnerability had been on course to an upward trend.
The RBI also applies various options to control the volatility of the exchange rates through active participation in the foreign exchange market. It buys US dollars at the time of rupee boost and sells them in times of depreciation. The policy keeps the rupee stable with proper reserves to face the uncertainties in the world economy. India's forex reserves soared to a peak of 704.88 billion in September 2024.