By Siddhi Nayak and Nimesh Vora
Mumbai – India’s foreign exchange reserves across $700 billion on record for the first time after rising for seven consecutive weeks on valuation gains and the central bank’s dollar purchases.
Foreign exchange reserves stood at $704.89 billion, up by $12.6 billion in the week to September 27, their biggest weekly increase since mid-July 2023. reserve Bank of India (RBI) figures came out on Friday.
India is the fourth economy in the world to cross $700 billion in reserves after China, Japan and Switzerland.
The country has been increasing its foreign exchange reserves since 2013, when foreign investors pulled out due to weak macroeconomic fundamentals.
Since then, tight controls on inflation, high economic growth as well as low fiscal and current account deficits have helped attract foreign funds, thereby boosting reserves.
foreign inflow The figure has touched $30 billion so far this year, largely due to investments in local debt being included as a key JP Morgan Index,
“Adequate FX reserves reduce currency volatility as the RBI has enough power to intervene if needed,” said Gaura Sen Gupta, economist at IDFC First Bank.
“Also it increases investor confidence thereby reducing the risk of sudden capital outflows.”
India’s foreign exchange reserves have increased by $87.6 billion so far in 2024, an increase of about $62 billion from last year.
According to Sen Gupta, there was an increase of $4.8 billion in dollar purchases by the RBI last week and an increase in valuation gains of $7.8 billion.
He said the increase in valuations was due to a decline in US Treasury yields, a weak dollar and rising gold prices.
The rupee strengthened above 83.50 against the dollar over the week in line with the latest reserves data, which could prompt the RBI to step in to boost its reserves.
For several months, the RBI has intervened on both sides of the market to keep the rupee in a narrow trading range, making it the least volatile among emerging market currencies.
RBI Governor Shaktikanta DasLast month, when asked about the lack of volatility in the rupee, he said that more volatility did not benefit the economy.
(Reporting by Siddhi Nayak and Nimesh Vora; Editing by Savio D’Souza and Varun HK)
