On June 21, foreign reserves stood at $653.71 billion, up by $816 million, said the RBI in a release on Friday. It may be noted that foreign exchange reserves had seen a marginal contraction to $652.9 billion in the previous week ending June 14 of this current year after seeing a stretch of nine consecutively rising weeks, which peaked to an all-time-high. In the latest data, the reserves were again heading northwards.
Last week, the country's forex reserves added $4.3 billion to end at an unprecedented $655.8 billion on June 7. The reserve build-up reflects strengthening economic fundamentals and provides better ability to the RBI to intervene in case of rupee volatility.
A robust forex reserve acts as armor that will help the RBI undertake effective intervention in both spot and forward currency markets and bolster dollar liquidity to ensure a sharp fall of the rupee does not happen. Conversely, a weakening of forex reserves reduces the scope for the RBI to help the rupee.
While addressing a Press Conference following the recent monetary policy meet, RBI Governor Das expressed confidence in the resilience of India's external sector and said, "The country remains well-positioned to meet its external financing obligations comfortably.".
The RBI explained that the current account deficit of India had already fallen by nearly half to USD 23.2 billion in 2023–24, accounting for 0.7 percent of GDP, against USD 67 billion in the previous fiscal, on account of the general merchandise trade deficit having narrowed. This was further substantiated by the commerce ministry data that disclosed a 9 percent rise in goods exports in May and holds a hefty balance of payments view.
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