India’s Forex Reserves Cross $600 Billion, Hit 15-Month High
Ira Singh
24 July’23
India’s foreign exchange reserves have soared to an impressive milestone, crossing the $600 billion mark and reaching a 15-month high.
The Reserve Bank of India data on Friday showed that the country’s forex reserve rose by $12.743 billion to $609.022 billion in the week that ended on July 14.In the previous reporting week, the overall reserves had increased by $1.23 billion to $596.28 billion.
The surge in reserves comes as a testament to the country’s robust economic recovery and strengthening position in the global financial landscape.This surge can be attributed to two primary factors. Firstly, there was an increase in the U.S. government bonds held by the Reserve Bank of India (RBI), contributing to the rise in reserves. The appreciation of non-dollar currencies played a significant role in bolstering the overall value of India’s foreign exchange holdings, according to information.
Gaura Sen Gupta, an India economist at IDFC Bank, was quoted by Reuters as stating that a significant portion of the week-on- week increase in forex reserves was driven by revaluation gains due to dollar weakness and lower US Treasury yields.
Furthermore, in the past three months, foreign investors have displayed strong interest in Indian shares, acquiring a net of $16 billion, as reported by the National Securities Depository Limited. This surge in foreign investment has provided the central bank with an opportunity to bolster its reserves by making strategic purchases from the market, according to sources.
However, the forex market experienced heightened volatility in the wake of the Ukraine invasion, necessitating the central bank to intervene and stabilise the market by selling dollars. Despite these efforts, the reserves faced challenges due to sharp interest rate hikes in the United States, which impacted the forex market and resulted in a notable reduction in reserves during that period.The Reserve Bank of India (RBI) reported the remarkable achievement, highlighting the nation’s consistent efforts to bolster its foreign exchange reserves in recent months. The latest data indicates a significant increase from the previous month’s reserves, reflecting India’s ability to attract foreign investments and retain stability amidst economic uncertainties.