India's foreign exchange reserves have been increased by $66 billion this year as it continue to rise for months, hitting several all-time highs. India's forex kitty is currently at $ 689.235 billion. Moreover, the latest RBI data, the largest component of forex reserves, foreign currency assets (FCA) was at USD 604,144 points. Additionally, Gold reserves are currently worth USD 61.988 billion.
The huge forex acts as a buffer to keep domestic economic activity unaffected by global shocks. According to estimates, India's current forex is sufficient to cover about a year of projected imports. Notably, in the year 2023, the country added about $ 58 billion to its forex. In contrast, India's foreign exchange reserves saw a decline of $ 71 billion in 2022. Given that, the current trend showcases India's robust economic management and rising exports.
Forex reserves, or foreign exchange reserves (FX reserves), are assets held by a nation's central bank or monetary authority. Foreign exchange reserves are generally held in reserve currencies, typically the US Dollar and, to a lesser extent, the Euro, Japanese Yen, and Pound Sterling.
With due consideration, the forex markets are closely monitored by the RBI, which intervenes only to maintain orderly market conditions. The prime goal for such an intervention is to contain excessive volatility in the exchange rate without reference to any pre-determined target level or band. The RBI intervenes in the market through liquidity management which also includes the sale of dollars, to prevent a depreciation in the rupee. Currently, Indian Rupee has gained a reputation as one of the most stable currencies in Asia. In contrast, the Rupee was one of the most volatile currencies a decade ago.
(With ANI Inputs)
