India’s forex reserves rise by $2 billion to hit fresh record-high of $684 billion, volume up over $60 billion YTD

India's foreign exchange (forex) reserves jumped by $2.299 billion to hit a fresh record high of $683.987 billion for the week ended on August 30. According to data released by the Reserve Bank of India (RBI), the previous record high was $681.688 billion registered in the previous reporting week when the forex reserves had jumped by $7.023 billion.

The reserves have been on an upward trend for some time. In 2024 alone, they have risen by over $60 billion cumulatively. This buffer of foreign exchange reserves helps insulate domestic economic activity from global shocks. 

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India's forex reserves: Key metrics

For the week ended August 30, India's foreign currency assets, the largest component of forex reserves, increased by $1.485 billion to $599.037 billion. 

Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

Gold reserves during the week increased by $862 million, bringing the total to $61.859 billion. As per estimates, India's foreign exchange reserves are now sufficient to cover about a year of projected imports. The Special Drawing Rights (SDRs) were up by $9 million to $18.468 billion.

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India's reserve position with the International Monetary Fund (IMF) was down by $58 million to $4.622 billion in the reporting week.

In the calendar year 2023, India added about $58 billion to its foreign exchange reserves. In contrast, India's forex reserves saw a cumulative decline of $71 billion in 2022. 

Forex reserves or FX reserves, are assets held by a nation's central bank or monetary authority. These are generally held in reserve currencies, typically the US Dollar and, to a lesser extent, the Euro, Japanese Yen, and Pound Sterling.

The RBI closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions, aiming to contain excessive volatility in the exchange rate without reference to any pre-determined target level or band. The RBI frequently intervenes in the market through liquidity management, including the sale of dollars, to prevent a steep depreciation of the rupee. 

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Sanjeev Agrawal, President of the PHD Chamber of Commerce and Industry, said the milestone will further strengthen the country’s external sector resilience. “With the support of prudent policy initiatives and a vigilant monetary policy stance, forex has reached the new all-time high record of over $683 billion amidst growing geopolitical uncertainties,” said Agrawal.

‘’Going ahead, coupled with RBI’s robust policies and continued handholding by the government, India’s strong forex will boost economic growth trajectory by strengthening its position internationally, drawing in foreign investments, and promoting domestic trade and industry,'' he added.