New Delhi: Notwithstanding global economic headwinds and rising risks from geopolitical instability, India’s foreign exchange reserves are at all-time highs and are forecast to exceed $700 billion in FY25 sooner than anticipated.
According to the latest report from global investment firm Jefferies, the RBI’s foreign reserve is expected to increase by $53 billion to $700 billion in the current fiscal year (FY25E). It added that the rupee is now the most stable currency among major economies.
However, given the surging forex reserves in FY25, the $700 billion mark does not look very far.
India’s forex reserves jumped $5.2 billion to a fresh all-time high of $689.24 billion (in the week ended September 6). According to the weekly RBI data, foreign currency assets (FCAs) grew by $5.10 billion to $604.1 billion.
The country is now seeing high domestic flows. Foreign Portfolio Investment (FPI) flows into debt markets have also increased. Last week, FPIs purchased equities in the Indian stock market worth Rs 16,800 crore, bringing the total buying to Rs 27,856 crore (till September 13).
According to NSDL data, FPIs bought equities in the cash market every day last week. As of 2024, FPIs had invested a total of Rs 70,737 crore.
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According to market watchers, positive FPI flows have helped the country achieve record forex levels. This will create external sector resilience and boost the economy across sectors.
The substantial foreign exchange reserves will provide the RBI with greater flexibility in monetary policy and currency management. India’s reserve position with the International Monetary Fund (IMF) has increased by $9 million to $4.631 billion.
According to market experts, India’s strong currency will accelerate economic growth by boosting its international standing, attracting foreign investment, and promoting local trade and industry.
Meanwhile, with inflation in the second quarter of FY25 expected to remain below the RBI’s target of 4.4% due to the cooling of food prices, the central bank may explore reducing rates at the next Monetary Policy Committee (MPC) meetings.
According to Jefferies, global interest rates have risen sharply, and a cycle reversal appears imminent in the coming quarters, allowing the RBI to lower benchmark interest rates in India.
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–IANS
