India’s foreign exchange reserves experienced a sharp jump, climbing to $653.966 billion as of March 7, marking the largest single-week gain in over two years. This increase follows a decline of $1.781 billion in the previous week, when reserves dropped to $638.698 billion, as reported by PTI.
The Reserve Bank of India (RBI) played a crucial role in this surge, primarily through a $10 billion forex swap on February 28. The dollar purchase, executed in exchange for rupees, was designed to boost liquidity and stabilise the financial markets.
Key Drivers of the Forex Reserve Growth
The increase in reserves was mainly driven by foreign currency assets, which surged by $13.993 billion to $557.282 billion. These assets fluctuate based on exchange rate movements involving major non-US currencies, including the euro, pound, and yen.
Other components also contributed to the rise:
- Gold reserves increased by $1.053 billion, reaching $74.325 billion.
- Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) rose by $212 million, bringing the total to $18.21 billion.
- India’s reserve position with the IMF saw a minor decline of $69 million, now standing at $4.148 billion.
Why India’s Forex Reserves Matter
A higher forex reserve strengthens India’s financial stability, helping the country manage external shocks, stabilise the rupee, and attract foreign investment. The latest increase reflects RBI’s active forex management strategy amid global uncertainties and fluctuating capital flows.
While the reserve position remains strong, market analysts will closely monitor future RBI interventions, as well as external factors such as global interest rates, trade balances, and foreign capital inflows.
