Monday, 19 May, 2025
Special Drawing Rights (SDRs) rose by $212 million to $18.5 billion during the reporting week, according to the Reserve Bank of India’s data. Image Source: IANS
The RBI data also showed that foreign currency assets, a key component of the reserves, expanded by $3.5 billion to stand at $578 billion
India’s foreign exchange reserves climbed for a seventh straight week, reaching a six-month high of $686.15 billion as of April 18, according to data released by the Reserve Bank of India on Friday. The reserves rose by $8.3 billion during the week, building on a cumulative increase of $39.2 billion over the previous six weeks. India’s forex holdings are now just $19 billion shy of the all-time peak of $704.89 billion recorded in late September. The RBI data also showed that foreign currency assets, a key component of the reserves, expanded by $3.5 billion to stand at $578 billion. These assets are maintained as a diversified portfolio across major currencies, including the US dollar, Euro, Pound sterling, and Japanese yen but are reported in dollar terms.
Dilip Parmar, foreign exchange analyst at HDFC Securities said, “The boost to forex reserves has been mainly on the back appreciation in the non-dollar assets like Euro and Japanese yen as well as rise in prices of gold in the last month or so. Additionally, there have also been rising foreign investor inflows in the equity market, which has also led to additions to the reserves.”
India’s foreign exchange reserve journey since 2014 reflects a narrative of strategic reforms and disciplined macroeconomic stewardship. When the Modi government took office a decade ago, the reserves stood at $304 billion, with the economy grappling with policy stagnation, large current account deficits, and fragile investor confidence. Over the years, a series of structural reforms and focused policy measures have reshaped the country’s macroeconomic framework, steering it toward greater resilience and stability.
Key reforms such as the implementation of the Goods and Services Tax (GST), the Insolvency and Bankruptcy Code, the Make in India initiative, and efforts to improve the ease of doing business laid a strong foundation for increased capital inflows. Between 2015 and 2017, rising foreign direct investment (FDI) and foreign portfolio investor (FPI) activity helped push India’s forex reserves past the $400 billion mark. Even amid global headwinds from 2018 to 2020, including trade tensions and a slowdown in worldwide growth, India's reserve accumulation remained resilient. By mid-2019, the foreign exchange buffer had crossed $500 billion, supported by steady remittance inflows, a robust performance in services exports, and timely interventions by the central bank.
Source: Reserve Bank of India
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.
India holds the position of the fourth-largest country in terms of foreign exchange reserves, trailing only behind China, Japan, and Switzerland.
During the week covered by the latest reserves data, the Indian rupee strengthened by about 0.8 percent, marking its best weekly performance since March 17, buoyed by a surge in foreign portfolio inflows into domestic equities. The local currency also benefited from a weaker US dollar, which came under pressure amid concerns over the impact of new tariffs on the American economy. However, by the end of the week, the rupee reversed course slightly, closing at 85.45 against the dollar, down 0.1%, as rising geopolitical tensions between India and Pakistan, following a terrorist attack in Jammu and Kashmir, weighed on sentiment.
Special Drawing Rights (SDRs) rose by $212 million to $18.5 billion during the reporting week, according to the Reserve Bank of India’s data. Meanwhile, India’s reserve position with the International Monetary Fund (IMF) also edged higher by $7 million, reaching $4.5 billion.
