Mumbai: India’s forex reserves jumped to a new record high of $692.296 billion in the week ending September 20, 2024, up $2.838 billion on a weekly basis. India’s foreign exchange reserves stood at $689.458 billion in the week ending September 13, 2024.
A rise in foreign currency assets drove up the forex kitty for the week under consideration, according to RBI’s weekly statistical supplement. FCAs rose $2.057 billion to $605.686 billion during the period under consideration. India’s gold reserves rose $726 million to $63.613 billion, while Special Drawing Rights rose $121 million to $18.54 billion. India’s reserve position with the IMF rose $66 million to $4.458 billion, according to RBI data.
Why is this important?
The surge in forex reserves shows that India has come a long way since the forex crisis of 1991 which forced India to tap credit lines from the IMF and resulted in the liberalisation of the Indian economy. To be sure, reserve accumulation is typical of any large emerging market economy, according to the NCAER paper.
India is a major importer and having robust reserves guarantees import cover for the world’s 5th largest economy. For perspective, India’s forex reserves equipped it to cover 10.2 months of imports when the kitty stood at %595.051 billion of of end-June 2023. This puts India comfortably ahead of the threshold prescribed by the International Monetary Fund.
India’s forex reserves hit an all-time high in November 2023 at $604 billion. “Reserves provide international liquidity to central banks to intervene readily in times of financial turbulence to maintain stability,” according to the NCAER paper.
India’s forex reserves rose $58 billion in the calendar year 2023. This was preceded by a $71 billion decline in the previous year.
Why are India’s forex reserves rising?
To be sure, India’s gold imports have jumped in recent weeks, amid a global shift towards the safe haven as expectations of geopolitical tensions rise. According to ANZ FX strategist Dhiraj Nim, the RBi is expected to continue with its gold purchase this year. RBI has purchased 43 million tonnes of gold so far this year until July 2024, according to World Gold Council data, making it the third last gold buyer among global central banks.
India forex reserves: According to RBI’s statistical supplement, India’s forex reserves surged to $692.296 billion in the week ending September 20, 2024. Economy Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
