Despite geo-political uncertainties, investors seemed to have kept their faith in India's growth story as the country's foreign exchange reserves for the first time touched $700 billion at $704.89 billion, according to RBI data in the week ending September 27, which was released on Friday.
The forex spurted $12.59 billion, which marked the highest weekly increase since mid-July 2023. India joins a very small league in the world, with only three countries crossing the $700-billion mark in reserves: China, Japan, and Switzerland. At a time when the same stood at $616 billion, the foreign currency assets (FCAs) recorded an increase of $10.4 billion. Another component that witnessed growth was the increase of gold reserves to $65.7 billion from $63.7 billion.
Special Drawing Rights (SDRs) had a modest increment of $8 million for this week to stand at $18.547 billion, with the country's reserve position in the International Monetary Fund decreasing by $71 million from $4.3 billion for that week. Foreign inflows into the country totalled $30 billion so far this year. In the near future, it is envisaged that India's forex reserves would continue to rise from here.
A healthy forex would enhance India's prospects of economic growth and positions its economy better globally by attracting foreign investments, promoting domestic trade and industry. Despite these challenges, headwinds from global economy uncertainties and deepening geopolitical uncertainties, the forex reserves are at all time high records levels. The rupee is currently the world's most stable currency among the major economies.
The country can be seen with strong domestic flows. FPI flows into debt markets have also picked up. It has helped the country to reach record forex levels. Positive FPI flows will lead to the building of external sector resilience and increase the economy across sectors. Substantial foreign exchange reserves would enhance the flexibility of RBI in monetary policy and currency management.
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