India's foreign exchange reserves continued their upward trajectory, registering a significant increase in the final week of December. Data released by the Reserve Bank of India on Friday showed the country's external buffer strengthened further, providing a robust cushion against global economic volatility.
Weekly Surge in Forex Kitty
According to the latest figures, India's forex reserves rose by $3.293 billion to reach $696.61 billion for the week ended December 26. This follows an even larger increase of $4.368 billion in the previous reporting week, when reserves climbed to $693.318 billion. The consistent growth highlights the resilience of India's external sector.
Breakdown of Reserve Components
The central bank's detailed data reveals how different components contributed to the overall increase. The foreign currency assets (FCAs), which form the largest part of the reserves, saw a modest rise. FCAs increased by $184 million to $559.612 billion. It's important to note that these assets, expressed in US dollar terms, are influenced by the appreciation or depreciation of other global currencies like the euro, British pound, and Japanese yen held within the reserves.
The standout performer was the gold reserve. Gold reserves recorded a sharp increase of $2.956 billion, reaching a total of $113.32 billion. This substantial jump underscores the strategic role of gold in diversifying the nation's reserve portfolio.
IMF-Related Reserves Also Climb
The Reserve Bank of India also reported increases in the country's holdings with the International Monetary Fund (IMF). Special Drawing Rights (SDRs) grew by $60 million to $18.803 billion. Simultaneously, India's reserve position with the IMF increased by $93 million to $4.875 billion during the same week.
This sustained accumulation of foreign exchange reserves is a key indicator of economic strength. It enhances the country's ability to manage its external obligations, stabilise the domestic currency, and provides a critical buffer against potential external shocks. The data for the week ending December 26 reinforces a positive trend in India's macroeconomic fundamentals.
