India's Forex Reserves Surpass $700 Billion Milestone for the First Time

India’s Forex Reserves Surpass $700 Billion Milestone for the First Time

India's foreign exchange reserves have surged to $704.89 billion in 2024, reflecting an increase of $87.6 billion this year alone. This growth is primarily driven by a $10.468 billion rise in foreign currency assets, with gold reserves also increasing by $2.184 billion.

Piyush Shukla Last updated on November 7th, 2024 01:50 pm

India’s foreign exchange reserves have exceeded $700 billion for the first time, reaching $704.89 billion in the week ending September 27, 2024. This marks a record increase of $12.58 billion, with foreign currency assets (FCAs) rising by $10.4 billion to $616 billion and gold reserves increasing by $2 billion to $65.7 billion. The surge is attributed to RBI’s dollar purchases and favorable valuation adjustments, driven by declining U.S. Treasury yields, a weakening dollar, and rising gold prices.

Key Global Standing

With this achievement, India joins China, Japan, and Switzerland as the only economies to have surpassed $700 billion in forex reserves. This growth has been bolstered by robust economic fundamentals, increased foreign inflows, and RBI’s proactive market interventions.

Future Outlook

India’s reserves are projected to continue rising, potentially reaching $745 billion by March 2026, further strengthening RBI’s control over the rupee’s valuation in global markets.

Components of Forex Reserves

Gold Reserves: Increased by $2.184 billion to $65.796 billion.
Special Drawing Rights (SDRs): Up by $8 million to $18.547 billion.
IMF Reserve Position: Decreased by $71 million to $4.387 billion.

Investment Inflows and Stability

So far in 2024, foreign inflows have hit $30 billion, bolstered by investments in local debt. This has positioned India’s reserves to cover over a year of projected imports, providing stability against external shocks. Analysts expect reserves to reach $745 billion by March 2026, enhancing the RBI’s ability to manage currency volatility.

Historical Context and Future Projections

Since 2013, when India faced significant capital outflows, macroeconomic improvements and effective inflation control have led to a steady accumulation of forex reserves. The RBI’s proactive stance ensures a less volatile rupee, making Indian assets increasingly attractive to foreign investors.

Here’s the table with key points relevant for exams:

Key Points	Details
Why in News	India’s forex reserves surpass $700 billion for the first time, reaching $704.89 billion in the week ending September 27, 2024.
Total Forex Reserves	$704.89 billion, a record increase of $12.58 billion.
Components of Forex Reserves	– Foreign Currency Assets (FCAs): $616 billion (up by $10.4 billion) – Gold Reserves: $65.7 billion (up by $2 billion) – Special Drawing Rights (SDRs): $18.547 billion (up by $8 million) – IMF Reserve Position: $4.387 billion (down by $71 million)
Key Global Standing	India joins China, Japan, and Switzerland in having forex reserves surpassing $700 billion.
RBI’s Market Interventions	Surge attributed to RBI’s dollar purchases and favorable valuation adjustments.
Factors for Growth	– Declining U.S. Treasury yields – Weakening dollar – Rising gold prices
Foreign Inflows	$30 billion in 2024, bolstered by investments in local debt.
Reserve Coverage	Reserves now cover over a year of projected imports, providing stability against external shocks.
Future Projections	Forex reserves projected to reach $745 billion by March 2026.
Historical Context	Forex reserves have steadily accumulated since 2013, with improvements in macroeconomics and inflation control.
RBI’s Role	Proactive stance to manage currency volatility and make Indian assets attractive to foreign investors.