Forex Reserves of India Hit Record High With $725.727 Billion

India’s forex reserves surged to a historic $725.727 billion for the week which was ended February 13. This also marking a significant milestone for the economy. According to data released by the Reserve Bank of India, reserves rose by $8.663 billion in a single week. The increase was mainly driven by strong gains in gold reserves and Foreign Currency Assets (FCA). This record level strengthens India’s external sector position and boosts confidence in currency stability.

India Forex Reserves at Record Level High: RBI Data Explained

The latest figures show a sharp increase in India forex reserves which is highlighting robust macroeconomic management.

Here is the detailed breakup mentioned below.

 The rise in India forex reserves reflects the both valuation gains and strong external inflows.

Foreign Currency Assets (FCA): Largest Component of Forex Reserves

Foreign Currency Assets (FCA) formed the biggest portion of India forex reserves which is currently standing at $573.603 billion.

FCA includes,

• US Dollar holdings
• Euro
• Japanese Yen
• British Pound

The value of these assets is expressed in dollar terms. Since currency values fluctuate globally changes in exchange rates can impact overall forex reserves even without fresh inflows.

The steady rise in FCA indicates stronger external buffers and improved liquidity management by the RBI.

Gold Reserves Surge: Strengthening Economic Stability

India’s gold reserves increased significantly by $4.990 billion, reaching $128.466 billion.

Gold is a crucial component of forex reserves because,

• It acts as a hedge against global economic uncertainty
• It strengthen investor confidence
• It protects against volatility of currency

The rise in gold reserves has contributed substantially to the record India forex reserves figure.

SDRs and Their Role in Forex Reserves

India’s Special Drawing Rights (SDRs) rose by $103 million to $18.924 billion. SDRs are international reserve assets created by the International Monetary Fund.

SDRs help countries in,

• Supplement official reserves
• Manage balance of payments needs
• Maintain liquidity during global crises

Though smaller in size compared to FCA and gold reserves, SDRs provide additional financial flexibility.

Question

Q. Which is the largest component of India’s forex reserves?

A) Gold Reserves
B) Special Drawing Rights
C) Foreign Currency Assets
D) IMF Loans