India's foreign exchange reserves saw a sharp increase, rising by $10.8 billion to reach $676.3 billion for the week ended April 4, according to the latest data released by the Reserve Bank of India (RBI) on Friday. This is the fifth straight week of reserve increase, indicating a rise in the external position of the country.
The majority of the rise was due to a rise in foreign currency assets, which rose by $9 billion, taking it to $574.08 billion. The gold reserves also made a positive contribution by gaining $1.5 billion to reach $79.36 billion. India's Special Drawing Rights (SDRs) also increased by $186 million to reach $18.36 billion.
This follows the last week ending March 28 recording a $6.6 billion increase in reserves, taking them to a five-month high of $665.4 billion.
The current upward momentum follows a period of earlier declines, which were largely due to valuation effects and RBI’s efforts to stabilize the rupee amid heightened forex market fluctuations. However, the recent trend of consistent weekly gains highlights renewed stability and confidence in the economy’s external metrics.
It’s worth noting that India’s foreign exchange reserves had previously peaked at a record $704.89 billion in September 2024.
A robust forex reserve position is usually considered a prime indicator of economic well-being. It gives the central bank the ability to buffer the rupee during periods of volatility by selling dollars to ensure currency stability. A decline in reserves, on the other hand, can limit such interventions, leaving the domestic currency vulnerable to external pressures.
In another heartening trend, India's goods trade deficit narrowed significantly in February to $14.05 billion—the lowest in almost three years. This was a significant improvement from January's $22.99 billion deficit. The decline was led by consistent exports combined with a fall in imports, indicating the strength of India's external sector despite ongoing global economic headwinds and geopolitical disruptions.
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