India’s foreign exchange reserves surpassed $700 billion for the first time, marking a historic achievement following seven consecutive weeks of gains, according to Reserve Bank of India (RBI) data. As of September 27, 2024, the reserves reached $704.89 billion, driven by a $12.6 billion increase in the latest week, the largest weekly rise since mid-July 2023. This surge reflects the central bank’s consistent dollar purchases alongside valuation gains.
India is now the fourth global economy to cross the $700 billion reserve threshold, joining China, Japan, and Switzerland. The country has steadily built up its foreign reserves since 2013, a period when foreign investors withdrew due to weak economic indicators. Improved inflation control, economic growth, and narrower fiscal and current account deficits have helped attract foreign investments, contributing to the accumulation of reserves.
Foreign inflows, particularly in local debt markets included in a prominent J.P. Morgan index, have added $30 billion so far this year. India’s foreign exchange reserves have swelled by $87.6 billion in 2024, far surpassing the near-$62 billion increase in 2023.
According to economist Gaura Sen Gupta from IDFC First Bank, ample forex reserves reduce currency volatility, enabling the RBI to intervene in the market when necessary. This also boosts investor confidence, lowering the risk of abrupt capital outflows. The recent gains include $4.8 billion from dollar purchases and $7.8 billion from valuation improvements, thanks to a weaker U.S. dollar, declining Treasury yields, and rising gold prices.
The RBI’s interventions have also contributed to keeping the rupee stable, maintaining it within a narrow trading range. As a result, the Indian rupee has been among the least volatile currencies in emerging markets. RBI Governor Shaktikanta Das previously stated that increased volatility would not be beneficial to the economy.
