As of February 7, the reserves surged by $7.6 billion, reaching an impressive $638 billion, marking the third consecutive week of growth, after a more modest $1.05 billion increase the week before.
The resilience of India’s reserves is particularly striking when viewed in the broader context of 2023, when the country saw an extraordinary $58 billion growth. This momentum has seamlessly carried over into 2024, with reserves already up by over $20 billion. Foreign exchange assets, which make up the largest portion of India’s reserves, grew by $6.42 billion, bringing the total to $544.11 billion by February 7. Gold reserves also increased significantly, going up by $1.3 billion to $72.2 billion. One of the main reasons for this increase was the Reserve Bank of India (RBI) buying 8 tonnes of gold in November 2024, part of a larger global trend of central banks increasing their gold reserves.
This increase in reserves has been primarily led by valuation gains, a key driver of the rising overall reserve levels. As the RBI has been actively selling dollars in the foreign exchange market to protect the rupee from weakening, the broader market has been surprisingly resilient. Even while the RBI is trying to contain the fall, external factors such as higher crude oil prices and geopolitical tensions have continued to put pressure on the rupee.
Apart from maintaining forex reserves, the RBI also made some audacious moves on its monetary policy, including decreasing the repo rate by 25 basis points to 6.25%, a first rate reduction in five years. The central bank, meanwhile, widened its open market operations (OMO), infusing more liquidity into the financial system, which has been operating in deficit since December 2024.
India’s growing foreign exchange reserves, paired with the RBI’s careful market interventions and strategic monetary decisions, highlight the country’s adaptability and strength in navigating global economic challenges. As India continues to fortify its financial base, these efforts underscore the nation's increasing economic influence and resilience in an ever-changing global environment.
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