India's Foreign Exchange Reserves Continue Upward Trend Amid Economic Challenges

India's foreign exchange reserves increased by USD 4.53 billion, reaching USD 658.8 billion as of March 21. This marks a three-week growth streak after a period of decline. The rise is attributed to RBI interventions aimed at stabilizing the Rupee, despite it nearing record lows against the US dollar.

In a significant development, India's foreign exchange reserves witnessed a rise of USD 4.529 billion, reaching an impressive USD 658.800 billion by the week ending March 21, as reported by the Reserve Bank of India (RBI). This trend marks the third consecutive week of gains, a notable recovery following the highest weekly increase in over three years recorded in the week ending March 7.

Previously, the country's forex reserves had dipped for nearly four months, touching an 11-month low. However, the reserves have shown a fluctuating pattern with sporadic gains and declines. After achieving an all-time peak of USD 704.89 billion in September, the reserves have dropped by approximately 6.5 percent.

The recent decline is attributed to RBI's strategic intervention to curb excessive depreciation of the Indian Rupee, which is now hovering near its all-time low against the US dollar. According to the latest RBI data, India's foreign currency assets (FCA), the largest component of the forex reserves, stand at USD 558.856 billion.

Moreover, gold reserves amount to USD 77.275 billion as per RBI figures. Analysts estimate that the current reserves can support around 10-11 months of projected imports. While 2023 saw an addition of USD 58 billion to the reserves, this comes in contrast to a USD 71 billion decline in 2022. In 2024, there was a modest increase of a little over USD 20 billion.

Foreign exchange reserves, managed largely in reserve currencies including the US Dollar, Euro, Japanese Yen, and Pound Sterling, are pivotal for economic stability. The RBI engages in tactical dollar buying and selling to manage liquidity and guard against dramatic Rupee depreciation, ensuring economic resilience.

(With inputs from agencies.)