India’s foreign exchange reserves rose for the second consecutive week, climbing by $1.48 billion to $695.10 billion, according to data from the Reserve Bank of India (RBI). The increase reflects stronger inflows from foreign investors, a stable rupee, and healthy external balances. With this rise, India continues to maintain one of the world’s largest reserve buffers, reinforcing confidence in its external sector resilience.
Why Reserves Are Rising
The uptick in reserves has been driven by robust foreign portfolio inflows, particularly into equities and debt markets. A narrowing current account deficit and moderation in crude oil prices have also eased external pressures.
For the RBI, higher reserves provide greater flexibility to intervene in currency markets, ensuring stability against global volatility.
The Current Composition
Forex reserves are a mix of foreign currency assets, gold holdings, Special Drawing Rights (SDRs), and the IMF reserve position. The latest rise came primarily from an increase in foreign currency assets, reflecting fresh inflows. Gold holdings also remained strong, benefitting from global price support.
Total reserves: $695.10 billion
Weekly increase: $1.48 billion
Why Reserves Matter for India
Strong reserves act as a safeguard for India’s external stability. They give the RBI a cushion to manage currency swings, cover import needs, and boost investor confidence. With global uncertainties—from oil price volatility to geopolitical risks—maintaining such a buffer is crucial.
At current levels, India’s reserves cover over 11 months of imports, providing one of the strongest external cover ratios among emerging economies.
Broader Implications
The steady rise in reserves signals a positive outlook for India’s macroeconomic stability. It improves the rupee’s credibility, enhances policy flexibility, and strengthens India’s case as a reliable investment destination.
For markets, the rise also indicates that the RBI will have adequate ammunition to counter speculative pressures, helping maintain currency stability even in times of global turbulence.
