Mumbai: India’s foreign exchange (Forex) reserves rose for the third consecutive week to a new lifetime high of $670.86 billion as of July 19, according to the latest data released by the RBI on Friday.
The reserves surged by $4 billion during the week after increasing by $14.9 billion in the preceding two weeks.
The increase in Forex reserves, a reflection of the robust fundamentals of the economy, provides the RBI with a stronger position to stabilize the rupee during periods of volatility, instilling optimism and reassurance in the market.
The substantial Forex reserves held by the RBI play a crucial role in stabilising the rupee. This is achieved through the central bank’s interventions in the spot and forward currency markets, where it releases more dollars to prevent the rupee from experiencing a sharp decline.
Conversely, a declining Forex kitty leaves the RBI less space to intervene in the market to prop up the rupee.
RBI Governor Shaktikanta Das recently underscored the resilience of India’s external sector, expressing the central bank’s confidence in comfortably meeting the country’s external financing requirements, thereby instilling a sense of confidence and security in the economy.
According to RBI data released on June 24 this year, India’s Current Account Deficit (CAD) declined to $23.2 billion (0.7 percent of GDP) during 2023-24 from $67.0 billion (2.0 percent of GDP) during the previous year due to a lower merchandise trade deficit, which reflects a robust external balance position.
The RBI data also showed that India’s CAD recorded a surplus of $5.7 billion (0.6 percent of GDP) in the January-March quarter (Q4) of 2023-24, as against a deficit of $8.7 billion (1.0 percent of GDP) in the preceding October-December quarter of 2023-24.
–IANS
