India's foreign exchange reserves stood at $684.8 billion as on October 25, decreasing by a significant $3.46 billion, amid relentless selling in the stock market and flared geopolitical tensions. It was according to data posted by the Reserve Bank of India on Friday.
The central bank said the gold reserves, that are a part of the foreign exchange kitty, had increased to $68.53 billion in the week ended 5 May from $67.45 billion.
Gold buying has seen an increase amidst geopolitical tensions. Industry experts say gold now acts as a hedge against US economic sanctions too. Traditionally, it has always been a safe haven asset and hedge against inflation.
Despite inflation being checked, gold has rallied to new highs. The share of gold in the country's forex reserves has also surged more than 210 percent since 2018.
India's foreign exchange reserves had risen to an all-time high of $704.885 billion at the end of September taking the country to the 4th position globally after China, Japan, and Switzerland in the size of its forex kitty.
In the current financial year, the forex reserves of the country have increased by $38.39 billion, which will be enough to cover the imports for 11.2 months based on the balance of payments, the RBI said.
This indicates the good macroeconomic fundamentals of the economy.
In the near future, India's forex reserves will rise further and the high forex will further enhance the country's growth trajectory in the economy because of its strengthening position worldwide, foreign investment inflow, and encouraging domestic trade and industry. The alterations of foreign currency assets are based on the acts of the central bank in the forex market and the variation in value of foreign assets within the reserve. Bullion is said to be ending the week up in an uncertain US election result that drove bets up on aggressive cuts in interest rates from around the globe for central banks, powered by safe-haven demand and ETF buying.
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