New Delhi: India’s foreign exchange reserves have increased by USD 1.657 billion to reach USD 586.412 billion, according to data available with the Reserve Bank of India (RBI). This marks the second consecutive week of gains, with the overall reserves surging from USD 6.306 billion to USD 584.755 billion the previous week. The level of forex reserves is at a level not seen in more than nine months.
The foreign currency assets, which include the effect of appreciation or depreciation of non-US units such as the euro, pound, and yen held in the forex reserves, have increased. The RBI’s weekly statistical supplement shows that the country’s gold reserves have declined by USD 521 million to reach USD 46.125 billion.
The Special Drawing Rights (SDRs) have decreased by USD 38 million to USD 18.412 billion, while the nation’s reserve position with the International Monetary Fund (IMF) has increased by USD 12 million to USD 5.19 billion during the reporting week.
In the foreign exchange market, the rupee has edged higher against the dollar, with the partially convertible rupee hovering at 82.0950, compared with its close of 82.1750 during the previous trading session. The US Dollar index (DXY), which tracks the greenback’s value against a basket of currencies, was up 0.03 percent to 101.88.
The RBI has noted in its monthly Bulletin that global economic conditions are marked by heightened uncertainty, with financial conditions remaining volatile and financial markets on edge. It added that in the country, aggregate demand conditions remain resilient, supported by a rebound in contact-intensive services. Expectations of a bumper rabi harvest, the fiscal thrust on infrastructure, and the revival in corporate investment in select sectors augur well for the economy.
Headline consumer price index-based (CPI) inflation has gradually declined from its peak of 7.8 percent in April 2022 to 5.7 percent in March 2023 and is projected to ease further to 5.2 percent in Q4: 2023-24.
The increase in forex reserves is a positive sign for the Indian economy, as it indicates that the country’s external sector is becoming stronger. The rise in reserves could help to cushion the economy against external shocks and also boost investor confidence in the country.
However, the decline in gold reserves is a cause for concern, as gold is seen as a safe haven asset that can help to diversify a country’s reserves. The decrease in gold reserves could be due to a variety of factors, including a fall in international prices or a decision by the central bank to sell gold to raise funds.
Overall, the increase in forex reserves is a positive development for the Indian economy, as it indicates that the country is becoming more resilient to external shocks. However, policymakers must also focus on ensuring that the country’s reserves are diversified and that the economy is able to withstand any potential shocks in the future.
