India’s Foreign Exchange Reserves Reach Record High of $729.33 Billion Following $12.42 Billion Increase
India’s foreign exchange reserves reached a record high of $729.328 billion for the week ending August 21, marking an increase of $12.422 billion. This surge represents the eighth consecutive week of growth, with total reserves rising by approximately $63 billion during this period. The latest figures surpass the previous record of $728.494 billion set in February.
Foreign Currency Assets, Gold Drive Weekly Rise
The increase in reserves was primarily driven by foreign currency assets, which rose by $9.482 billion to $591.333 billion. Additionally, the value of India’s gold reserves increased by $2.801 billion to $114.218 billion. Special Drawing Rights (SDRs) also saw a rise of $112 million, bringing the total to $18.852 billion, while India’s reserve position with the International Monetary Fund increased by $26 million to $4.925 billion. Changes in foreign currency assets reflect fluctuations in the value of non-US currencies held in reserves.
Measures to Boost Dollar Inflows
The record increase follows a series of measures introduced in June aimed at attracting overseas dollar inflows and strengthening the balance of payments. These measures included discounted hedging facilities for state-run firms and banks, as well as a free-of-cost hedging option for banks to raise foreign currency deposits. The Reserve Bank of India (RBI) reported nearly $73 billion in inflows under these schemes from June 5 to August 21, with approximately $65 billion coming from non-resident Indian deposits. The scale of these inflows led the RBI to advance the closure of its deposit hedging facility to the end of August.
RBI Interventions Offset Some Inflows
Bankers noted that the RBI’s frequent interventions in the foreign exchange market to support the rupee have likely mitigated some of the effects of the overseas dollar inflows. The previous record forex reserve level of $728.494 billion was achieved in the week ending February 27, but geopolitical tensions led to a decline in reserves as the rupee faced pressure and the RBI intervened through dollar sales.
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