India's foreign exchange reserves jump by $305 million, reaching a three-month high of $654.27 billion

By: Team India Tracker

India's reserves had peaked at a record USD 704.89 billion in September, but have since fallen by nearly 7 percent.

India's foreign exchange reserves saw an uptick of USD 305 million, reaching USD 654.271 billion during the week ending March 14. This increase follows the previous week's notable surge, which marked the highest weekly gain in over three years. Prior to these recent rises, the country's forex reserves had been on a steady decline for nearly four months, hitting an 11-month low. Since then, fluctuations have been observed, with alternating weeks of growth and contraction.

India's reserves had peaked at a record USD 704.89 billion in September, but have since fallen by nearly 7 percent. Experts attribute much of this decline to interventions by the Reserve Bank of India (RBI), which have primarily aimed at managing the sharp depreciation of the rupee. At present, the Indian rupee is near its record low against the US dollar.

As per the latest data from the RBI, the country's foreign currency assets (FCA), which make up the largest share of forex reserves, stand at USD 557.186 billion, while gold reserves are valued at USD 74.391 billion. Analysts estimate that India's current forex reserves are sufficient to cover approximately 10 to 11 months of projected imports. In 2023, India added around USD 58 billion to its reserves, in stark contrast to the USD 71 billion decline recorded in 2022. The reserves saw a modest growth of just over USD 20 billion in 2024.

Source: Reserve Bank of India

The rupee, along with many other Asian currencies, has experienced significant volatility due to the unpredictable global risk landscape, marked by uncertainties in global trade and growth amid ongoing shifts in US tariff policies. To stabilize the forex market, the RBI has intervened by selling dollars in the spot market and conducting dollar-rupee buy-sell swaps, aimed at improving rupee liquidity within the banking system.

Foreign currency maintained by a country's central bank is known as its Forex reserves. It offers protection from unforeseen external shocks. Typically, reserve currencies like the dollar are used to maintain it. The fundamental goal of holding foreign exchange reserves is to preserve confidence in the monetary and exchange rate management policies as well as to preserve currency liquidity to absorb external shocks. Also, having sufficient reserves helps reassure investors in times of extreme uncertainty, such as wars or unrest, portrays a positive image, and reassures trading countries.