Updated March 22nd, 2024 at 17:50 IST

Foreign exchange reserves hit record high, reflecting strong inflows

The Indian economy's robust growth trajectory, expected at 7.6 per cent this year and among the fastest globally, has attracted major overseas investment.

Reported by: Business Desk
The recent increase in forex reserves was partly attributed to the maturity of a $5 billion dollar/rupee swap that matured on March 11 | Image:Unsplash
Advertisement

Forex reserves at record high: Country’s foreign exchange reserves have surged to a record high, marking the fourth consecutive week of growth, according to data released by the central bank on Friday. As of March 15, the reserves reached an unprecedented level of $642.49 billion, reflecting an increase of $6.4 billion during the reporting week.

The Indian economy's robust growth trajectory, expected at 7.6 per cent this year and among the fastest globally, has attracted major overseas investment. In 2023 alone, the country witnessed inflows of $20.7 billion in overseas equity, with an additional $1.85 billion recorded so far this year. Furthermore, India's inclusion on global bond indexes has drawn over $10 billion since late September.

Advertisement

The Reserve Bank of India (RBI) has been absorbing a substantial portion of these inflows to prevent rapid appreciation of the rupee, consequently bolstering its forex reserves. The accumulation of reserves provides the central bank with ample ammunition to manage currency fluctuations during periods of market volatility.

India's forex reserves, including the central bank's forward holdings, now cover more than 11 months of imports, hitting a nearly two-year peak. IDFC FIRST Bank economist Gaura Sen Gupta commented on the healthy external metrics, emphasizing the adequacy of the current reserve levels in shielding the economy from external shocks.

Advertisement

The recent increase in forex reserves was partly attributed to the maturity of a $5 billion dollar/rupee swap that matured on March 11. Additionally, the RBI likely made additional dollar purchases amounting to approximately $3 billion during the week, contributing to the rise in reserves.

Changes in foreign currency assets are influenced by the RBI's intervention in the forex market and fluctuations in the value of foreign assets held in the reserves. Despite the rupee's marginal decline of 0.1 per cent against the dollar during the week of March 15, trading within a range of 82.6400 and 82.9525, the currency settled at a record closing low of 83.4250 on Friday, marking a 0.7 per cent decline for the week.

Advertisement

(With Reuters inputs)
 

Advertisement

Published March 22nd, 2024 at 17:50 IST