India’s Forex Reserves Hit Record $723.77 Billion

India’s foreign exchange reserves surged by a robust $14.361 billion to reach an all-time high of $723.774 billion in the week ended January 30, reflecting strong external sector fundamentals. The latest data released by the Reserve Bank of India shows sustained momentum after a rise of $8.053 billion in the previous week, when reserves had crossed the earlier peak recorded in September 2024.

Drivers Behind the Sharp Increase

The primary contributor to the latest jump was a significant rise in gold reserves. Gold holdings increased by $14.595 billion to $137.683 billion, underscoring the central bank’s strategy of diversifying reserve assets amid global financial uncertainty. Elevated gold prices and valuation gains also supported this sharp increase during the reporting week.

Foreign Currency Assets See Marginal Dip

Foreign currency assets (FCAs), which constitute the largest share of the reserves, declined marginally by $493 million to $562.392 billion. In dollar terms, FCAs are influenced by movements in major non-US currencies such as the euro, pound sterling, and Japanese yen. Despite the weekly dip, FCAs remain at historically high levels, offering a substantial buffer against external shocks.

SDRs, IMF Position and Rupee Trends

Special Drawing Rights (SDRs) rose by $216 million to $18.953 billion, while India’s reserve position with the International Monetary Fund increased by $44 million to $4.746 billion. During the same period, the Indian rupee posted its strongest weekly gain in over three years, rising 1.4 percent, even though it ended the week slightly weaker at 90.6550 per US dollar amid dollar outflows.

Important Facts for Exams

• India’s forex reserves crossed $700 billion for the first time in September 2024.
• Gold is the second-largest component of India’s foreign exchange reserves after FCAs.
• SDRs are international reserve assets created by the IMF to supplement member countries’ reserves.
• High forex reserves enhance a country’s ability to manage currency volatility.

Policy Context and Economic Significance

The record-high reserves coincide with the central bank’s decision to keep the repo rate unchanged at 5.25 percent and maintain a neutral monetary policy stance. Strong reserves, stable policy signals, and improved trade dynamics with major partners continue to bolster investor confidence and strengthen India’s macroeconomic stability.