After increasing for seven consecutive weeks due to valuation gains and the central bank’s dollar purchases, India’s foreign exchange reserves finally surpassed $700 billion for the first time ever.
According to Reserve Bank of India (RBI) figures released on Friday, the foreign exchange reserves were at $704.89 billion after increasing by $12.6 billion during the week ending September 27, the largest weekly increase since mid-July 2023.
Since then, tighter inflation control, faster economic expansion, and smaller current account and fiscal deficits have all contributed to the increase of reserves by attracting foreign investment. This year, foreign inflows have totalled $30 billion, primarily from investments in local debt that were incorporated into a significant J.P. Morgan index.
According to IDFC First Bank economist Gaura Sen Gupta, having sufficient foreign exchange reserves lowers currency volatility since the RBI has the authority to step in if necessary.
“Moreover it adds to investor confidence which reduces the risk of sudden capital outflows.”
India’s foreign exchange reserves have risen by $87.6 billion so far in 2024, surpassing the over $62 billion growth for the entire previous year.
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