India's foreign exchange reserves surged to an all-time high, reaching USD 666.85 billion, as reported by the Reserve Bank of India (RBI). This new peak, recorded on 12 July, marks an increase of USD 9.69 billion in just one week, surpassing the previous record of USD 657.2 billion.
The recent data indicates a significant rise in India's foreign currency assets (FCA), the largest component of the forex reserves, which climbed by USD 8.3 billion to USD 585.47 billion. Gold reserves also saw an increase, growing by USD 1.2 billion to reach USD 58.66 billion.
According to a recent RBI report, the current level of foreign exchange reserves is sufficient to cover over 11 months of projected imports. In 2023 alone, the RBI has added approximately USD 58 billion to its reserves, contrasting with a cumulative decline of USD 71 billion in 2022.
Foreign exchange reserves, or FX reserves, are assets held by a nation's central bank or monetary authority. These reserves are typically composed of reserve currencies such as the US Dollar, Euro, Japanese Yen, and Pound Sterling.
The country's foreign exchange reserves last peaked in October 2021, but the subsequent decline was largely due to the increased cost of imported goods in 2022. Additionally, the relative fall in forex reserves was linked to the RBI's market interventions aimed at managing the uneven depreciation of the rupee against a strong US dollar.
The RBI often intervenes in the forex market through liquidity management, including the sale of dollars, to prevent sharp depreciation of the rupee. It closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions, containing excessive volatility in the exchange rate without targeting any specific level or band.
