India's foreign exchange reserves rose by $963 million to reach $672.587 billion for the week ended June 19, according to data released by the Reserve Bank of India (RBI) on Friday. The increase came despite a decline in foreign currency assets (FCAs), which constitute a major component of the reserves.
Foreign Currency Assets Decline
Foreign currency assets, expressed in dollar terms, decreased by $3.072 billion to $541.217 billion during the reporting week, the RBI data showed. FCAs include the effect of appreciation or depreciation of non-US units like the euro, pound, and yen held in the reserves.
Gold Reserves and Other Components
Gold reserves rose by $3.5 billion to $58.9 billion, providing a significant boost to the overall reserves. Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) increased by $8 million to $18.4 billion. The reserve position in the IMF remained unchanged at $4.3 billion.
Impact on the Economy
The rise in forex reserves provides a cushion against external shocks and supports the rupee's stability. A higher reserve level also enhances investor confidence in the Indian economy. According to analysts, the increase in gold reserves reflects a strategic diversification by the RBI amid global uncertainties.
