India's forex reserves rose by $6.6 billion to a five-month high of $665.4 billion during the week to March 28, 2025, as per data released by the Reserve Bank of India (RBI) on Friday.
This is the fourth straight week of rise in the nation's forex reserves, indicating a turnabout from the previous fall owing to valuation fluctuations and market interventions by the RBI.
The recent rise comes after a $4.5 billion rise in reserves for the week ended March 21. With this surge, the forex reserves have now recovered significantly from the previous slide and are close to the historic high of $704.9 billion touched in September 2024.
The RBI Weekly Statistical Supplement further revealed that gold reserves of India, a primary component of the forex pool, increased by $519 million, hitting $77.8 billion.
Rupee Stability Boost
A strong forex reserve position not only speaks volumes about the strength of the Indian economy but also provides the central bank the leeway to deal with volatility in the currency markets. Having a stronger reserve base enables the RBI to let out dollars both in the spot and forward markets, preventing any steep depreciation of the rupee.
The forex kitty strengthening has helped to give a stronger rupee, providing a positive signal for inflation control and overall economic stability in the face of global uncertainties.
Trade Deficit at 3-Year Low
In another indication of resilience, India's merchandise trade deficit declined sharply to $14.05 billion in February—the lowest in more than three years—from $22.99 billion in January. This was according to the Ministry of Commerce and Industry, thanks to a consistent increase in exports and a steep decline in imports.
Merchandise exports went up 1.3% to $36.91 billion in February, compared to $36.43 billion the month before. Imports declined by 16.3% to $50.96 billion, from $59.42 billion in January.
The better trade data, coupled with improving foreign exchange reserves, point to a more resilient external sector amid persistent global geopolitical tensions and economic headwinds.
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