India's forex reserves hit a new high of $645.6 billion; what this means for the country
Upstox
2 min read • Updated: April 5, 2024, 5:39 PM
Summary
Forex reserves are assets a country's central bank holds to fulfil international payment obligations and ensure that its currency remains stable. Typically, foreign exchange reserves include foreign currencies and assets like gold and silver.
Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said that India's foreign exchange reserves rose to a record high of $645.6 billion as of March 29, 2024.
"Latest data on various external vulnerability indicators suggest improved resilience of India's external sector," Das said, adding, "We remain confident of meeting our external financing requirements comfortably."
Forex reserves are assets a country's central bank holds to fulfil international payment obligations and ensure that its currency remains stable. Typically, foreign exchange reserves include foreign currencies and assets like gold and silver.
The governor also said India is increasing its gold reserves as part of its forex deployment. "We are building up gold reserves that are a part of our reserve deployment," he added at the post-policy review press conference.
According to the official data, the value of gold in the foreign exchange, as of March 22, stood at ₹51.4 billion, which is ₹6.2 billion more than the value as of March 2023.
He said that RBI has been consciously focused on building forex reserves over the last four to five years to "act as a buffer against future risks where there are dollar outflows from India".
India's rupee rose nine paise to close at 83.30 (provisional) against the US dollar after RBI Monetary Policy Committee announcement (MPC).
What do high forex reserves mean for a country?
An increase in forex reserves signifies that a country has enough foreign currency to make international payments, including for imports and defending the value of its currency in foreign exchange market. It also represents stability and attracts foreign investment.
A high foreign exchange reserve helps countries against crises and the economy. It allows countries to cope with sudden changes in exchange rates or commodity prices.
The world views countries with high forex reserves as creditworthy. It also increases the country's influence in multilateral bodies.