India’s foreign exchange reserves have grown for the third straight week, rising by $7.6 billion to reach $638 billion as of February 7, as per the most recent data from the Reserve Bank of India (RBI). This follows a $1.05 billion increase the previous week, bringing total reserves to $630.6 billion as of January 31.
Forex Reserves on a steady Rise
India’s forex reserves had hit an all-time high of $704.8 billion in September 2023. After a strong rebound last year, reserves grew by nearly $58 billion in 2023, and the upward momentum continues in 2024 with an increase of over $20 billion so far. This trend reflects steady capital inflows and the country’s stronger external financial position.
Breakdown of reserves growth
- Foreign currency assets (FCA): A key part of the total reserves, FCA increased by $6.42 billion, reaching $544.1 billion.
- Gold reserves: India’s gold holdings also saw a significant boost, increasing by $1.3 billion to $72.2 billion.
India expands gold holdings
In November 2024, the RBI purchased an additional 8 tonnes of gold as part of a global trend, according to the World Gold Council (WGC), where central banks collectively bought 53 tonnes of the precious metal. This brought India’s total gold reserves to 876 tonnes, making it the second-largest buyer of gold in 2024 after Poland.
RBI cuts repo rate for the first time in five years
In a significant monetary policy move, the Reserve Bank of India (RBI) has lowered the repo rate by 25 basis points to 6.25%, marking its first rate cut in five years. This decision is expected to support economic growth by making loans more accessible and reducing borrowing expenses for businesses and consumers.
Importance of forex reserves in India’s economy
India’s forex funds are key to keeping money value steady. The RBI uses these funds to handle rupee changes, especially when outside investors withdraw their money from the stock market. Good levels of these funds boost money safety and help India deal more effectively with world money ups and downs.
Also Read: India’s Forex Reserves Fall by $2.6 Billion Amidst Gold Reserve Increase
