India's foreign exchange reserves increased noticeably by $4.5 billion to $690.62 billion as of the week ended May 9, as per data published by the Reserve Bank of India (RBI) on Friday.
Foreign currency assets (FCA), the largest component of the reserves, increased by $196 million to $581.37 billion.
It's worth mentioning that the foreign exchange value of foreign currency assets captures the appreciation or depreciation of non-US dollar currencies — including the euro, pound, and yen — held as part of the reserves. At the same time, gold reserves, which are also included in the forex reserves, rose by $4.5 million to $86.33 billion during the same period, the RBI report added.
Conversely, special drawing rights (SDRs) fell by $26 million to $18.53 billion, and India's reserve position with the International Monetary Fund (IMF) fell by $134 million to $4.37 billion in the week under review.
A rise in the forex reserves of the country tends to make the rupee stronger against the US currency.
Increased foreign exchange reserves reflect robust economic fundamentals and give the RBI more room to stabilize the rupee during volatile periods.
With a robust forex reserve balance, the RBI can intervene positively in spot and forward currency markets by selling dollars to stem sudden rupee depreciation.
The situation reverses if reserves fall, leaving the RBI with less capacity to prop up the rupee.
Meanwhile, India's external sector showed its mettle with overall exports of goods and services posting a strong growth of 12.7 percent in April to $73.80 billion. This was higher than $65.48 billion reported during April last year, regardless of economic uncertainties worldwide, including US tariff increases, Commerce Ministry data indicated on Thursday.
Merchandise exports in particular rose by 9.03 percent to $38.49 billion in the month. Importantly, high-tech industries such as electronics and engineering products headed the growth, indicating India's increasing manufacturing capacities.
Exports of electronics products jumped by a whopping 39.51 percent to $3.69 billion in April compared to $2.65 billion in the corresponding month last year.
Exports of engineering goods also went up by 11.28 percent compared to $8.55 billion to reach $9.51 billion, and shipments of gems and jewellery grew 10.74 percent to $2.5 billion from $2.26 billion in April last year.
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