India's foreign exchange reserves jumped by a sharp $4.3 billion in the week ended June 7 to a record lifetime high of $655.8 billion, data released by RBI on Friday showed. It has overshot the previous one of May 31 at $651.5 billion, which RBI Governor Shaktikanta Das shared on June 7 itself, as deposits kept on upwards trajectory in the weeks.
The rise in foreign exchange reserves was accompanied by Commerce Ministry data showing a sharp 9% growth in the country's goods exports in May.
Reacting to these, the RBI Governor, Shaktikanta Das said in a press briefing at the conclusion of the recent monetary policy meeting: "India's external sector remains resilient, and we are optimistic about meeting our external financing needs comfortably."
India also remains the world's largest recipient of global remittances, accounting an estimated 15.2 percent share in 2024", He said, "Das said that the current account deficit would remain sustainable in 2024-25.
Accumulation in foreign exchange reserves implies strong economic fundamentals, and thereby RBI has more flexibility to stabilize the rupee as and when it faces volatility. A large reserve position gives the RBI room to intervene in the spot and forward currency markets through the injection of more dollars to arrest sharp deprecation of the rupee.
On the other hand, a fall in foreign exchange reserves reduces the capability of the RBI to intervene and buy rupees in the market and hence reduces the possibility to effectively control currency volatility.
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