India's forex reserves rose by $1.033B to $687.260B for the week ending Dec 5, driven by higher gold reserves. Despite a dip in foreign currency assets, the overall kitty remains near its all-time high, covering 11 months of imports.
India's foreign exchange reserves rose marginally, by USD 1.033 billion in the week that ended December 5 to USD 687.260 billion, driven by a jump in gold reserves, the Reserve Bank of India's latest 'Weekly Statistical Supplement' data showed.
Over the past few weeks, the forex kitty has been largely in a downtrend, except for a few. Still, the country's foreign exchange (forex) kitty is hovering close to its all-time high of USD 704.89 billion, reached in September 2024.
Forex Components: FCA Dips, Gold Surges
For the reported week (that ended December 5), India's foreign currency assets (FCA), the largest component of foreign exchange reserves, stood at USD 556.880 billion, down USD 151 million. The RBI data showed that gold reserves currently stand at USD 106.984 billion, up USD 1.033 billion from the previous week. The price of the safe-haven asset gold has been on a sharp uptrend over recent months, perhaps amid heightened global uncertainties and robust investment demand.
RBI's Take on External Sector Resilience
After the latest monetary policy review meeting, the RBI had said that the country's foreign exchange reserves were sufficient to cover more than 11 months of merchandise imports. Overall, India's external sector remains resilient, and the RBI is confident it can comfortably meet external financing requirements.
Year-on-Year Reserve Trends
In 2023, India added around USD 58 billion to its foreign exchange reserves, contrasting with a cumulative decline of USD 71 billion in 2022. In 2024, reserves rose by just over USD 20 billion. So far in 2025, the forex kitty has increased by about USD 47-48 billion, according to data.
RBI's Forex Market Intervention
Foreign exchange reserves, or FX reserves, are assets held by a nation's central bank or monetary authority, primarily in reserve currencies such as the US dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling.
The RBI often intervenes by managing liquidity, including selling dollars, to prevent a steep depreciation of the rupee. The RBI strategically buys dollars when the Rupee is strong and sells when it weakens. The Indian rupee has been under pressure for a host of reasons. It has already weakened by over 5 per cent this year on a cumulative basis. (ANI)
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