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India’s forex reserves jumped $12.58 billion on week, breaching $700 billion mark for the first time, standing at $704.88 billion as on September 27, according to data released by the Reserve Bank of India (RBI).
Foreign currency assets (FCA)--which include investment in securities, deposits with other central banks and the BIS, and deposits with commercial banks overseas—stood at $616.15 billion, whereas gold reserves stood at nearly $66 billion.
Special Drawing Rights (SDRs), which refers to India’s commitment to provide resources under the International Monetary Fund’s (IMF) New Arrangements to Borrow (NAB) and investment in SDR denominated Notes issued by IMF, was at $18.5 billion, while the reserve tranche position in IMF stood at $4.38 billion.
Says Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA, “High forex reserves will offer insurance to steady the currency in the event that geopolitical tensions disrupt sentiment for emerging market currencies.”
Sanjeev Agrawal, President, PHDCCI, said that India’s standing in the global economic ecosystem is being strengthened by its all-time high forex reserve, amidst growing geopolitical vulnerabilities. “Continued government policy support and strong monetary policy stance, supported by robust capital markets are propelling India on a higher growth trajectory towards “Viksit Bharat@2047”, he said.
Foreign inflows
Strengthened forex and a strong monetary policy stance are creating confidence among trade and industry and attracting foreign investments, he added.
With the US Federal Reserve cutting its policy rate by 50 basis points, experts anticipate higher forex inflows in the Indian financial markets due to the relatively higher returns.
In his last monetary policy statement (August 8, 2024), RBI Governor Shaktikanta Das said: “India’s foreign exchange reserves reached a historical high of US$ 675 billion as of August 2, 2024. Overall, India’s external sector remains resilient as key indicators continue to improve. We remain confident of meeting our external financing requirements comfortably.” ENDS
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