A recent report from the Reserve Bank of India (RBI) indicates a significant increase in the country’s foreign exchange reserves. As of March 28, the reserves rose to $665.4 billion, a five-month high, with an addition of $6.56 billion. This growth is significant, considering it comes after a decline in the previous month. The rupee also saw a notable appreciation of 0.6% against the dollar during the reporting period.
The RBI did not intervene much in the foreign exchange market to defend the currency this time, reportedly due to the renewed flow of foreign investments into Indian equities. This situation led to a 2.3% gain for the rupee in March, marking its best monthly performance since November 2018.
Despite this appreciation, the rupee still closed the fiscal year with a decline of 2.46%, reflecting a somewhat inconsistent performance. Notably, the Rs. 66 lakh crore ($901 billion at current exchange rate) forex reserve is enough to cover 11 months of imports, making it the fourth-largest in the world, behind China, Japan, and Switzerland.
The upward trend in forex reserves is worth monitoring as it represents the central bank’s foreign currency assets, such as its gold holdings and reserves, which can be used to boost the economy in times of need. The cumulative additions of $20.1 billion over the last three weeks have placed the country’s forex reserves at $665.4 billion, with an increase of $6.596 billion from the previous week.