India's foreign exchange reserves saw a sharp hike of $5.17 billion to $696.66 billion for the week ended June 6, as per information published by the Reserve Bank of India (RBI) on Friday.
This remarkable increase pushes the reserves to almost their historic high of $704.885 billion, marked at the close of September 2024.
A strong forex reserve position stabilizes the Indian rupee against the US dollar, providing increased financial comfort.
Foreign exchange assets, which account for the majority of the reserves, increased by $3.47 billion to reach $587.69 billion. These assets expressed in US dollars also capture the fluctuations of other major world currencies such as the euro, yen, and pound, which are constituent members of the reserve basket.
The gold reserves in the reserves crept up by $1.6 million to $85.89 billion over the same timeframe. In times of worldwide geopolitical turmoil, central banks everywhere — including India's — have been investing more and more in gold as an abode of safety. Currently, India's gold reserves stand at $83.582 billion, with the RBI having almost doubled its share of gold in the forex kitty since 2021.
Besides, special drawing rights (SDRs) increased by $102 million to $18.67 billion and India's position in the International Monetary Fund (IMF) went up by $14 million to $4.4 billion, the central bank said.
As of May 30, last reporting week, India's reserves were at $691.5 billion. The current reserve position is sufficient to pay for over 11 months of imports and about 96 percent of the country's external debt, RBI Governor Sanjay Malhotra pointed out during last week's monetary policy presentation.
The Governor declared: "Overall, India's external sector is robust as crucial external sector vulnerability indicators remain on the improving trend. We are optimistic of meeting our external financing needs."
An increasing reserve base is usually regarded as a sign of economic prowess, providing the central bank with more leeway to deal with currency volatility. With a large forex buffer, the RBI can enter the spot and forward markets for currencies, putting in dollars to curb sudden rupee depreciation whenever necessary.
Read also| India Pursues Strategic Engagement with China on Rare Earths, Says MEA
