India’s Forex Reserves Hit Record $729.3 Billion

India’s foreign exchange reserves jumped by $12.4 billion to a record $729.3 billion in the week ended August 21, according to the most recent figures released by the Reserve Bank of India. The significant jump is a result of strong capital flows after the RBI’s concessional swap window, as well as a revaluation gain. The recent jump comes as a recovery after reserves dropped to $666.9 billion in June in view of the pressures on the foreign exchange market. As such, India has reserves that can cover for more than 11 months of goods imports.

Forex Reserves Cross Previous Record

The forex reserves of India crossed their previous high of $728.5 billion reached in the week ended February 27.

Thereafter, the forex reserves have been declining as a result of the interventions by the RBI in the foreign exchange market through selling dollars in view of the crisis in West Asia. By June 26, the reserves stood at $666.9 billion.

Since then, there has been a remarkable recovery in India’s forex reserves. In the last eight weeks, India’s forex reserves have risen by about $62.4 billion.

RBI’s Swap Window Brings in Dollars

One of the important contributors to the recovery is the swap window of RBI, which was opened on June 5 for bringing in foreign currency.

As of August 21, the window has brought in about $72.8 billion, and inflows could reach an estimated $90 to $100 billion until the window closes on August 31.

This large amount of inflows is helping to replenish the forex buffer of the country that fell down earlier in the year.

Foreign Currency Assets Jump

Foreign Currency Assets (FCAs), which make up the largest part of the reserves of India, have risen by $9.48 billion to $591.33 billion in the reported week.

This rise in FCAs is not because of the dollar purchase alone. While about $6.1 billion is believed to have been the result of purchases by RBI, the rest has mainly been accounted for by revaluation gains.

Foreign Currency Assets also include changes in value of non-dollar currencies, such as Euro, Sterling and Yen.

India’s Gold Reserves Increase as Well

During the same week, the country’s gold reserves rose by $2.8 billion to $114.22 billion.

This increase followed a 5.18% price increase for gold which hit $4,603 an ounce. The price of gold internationally can thus affect the dollar value of India’s reserves despite not buying any more gold.

Additionally, Special Drawing Rights went up by $112 million to $18.89 billion while India’s reserve position with the IMF also increased by $26 million to $4.93 billion.