India's Forex Reserves Rise To New High Of $670 Billion As RBI Mops Up Bond Inflows
The forex kitty rose by $4 billion over the previous reporting week, marking the third straight weekly increase.
India's foreign exchange reserves swelled to another all-time high of $670.8 billion for the week ended July 19, the Reserve Bank of India data showed on Friday. The central bank continued to soak up dollar inflows into the domestic debt market following India's inclusion in a key bond index last month.
The forex kitty rose by $4 billion over the previous reporting week, marking the third straight weekly increase.
The reserve pile had recovered after hitting a low of $524.5 billion in October 2022 as the central bank replenished its kitty amid solid overseas inflows.
Foreign investors have pumped in Rs 1.4 lakh crore into the country's debt and equity markets so far this year, according to data from the National Securities Depository Ltd. The capital flow has largely gone into the domestic debt market, thanks to India's inclusion in the JPMorgan Global Emerging Market Bond Index.
July has seen Rs 17,848 crore and Rs 35,886 crore make its way into Indian bonds and equities, respectively.
For the week-ended July 19, foreign currency assets—a major component of the reserves—rose by $2.6 billion to $588 billion, RBI data showed.
In dollar terms, foreign currency assets include the effect of the appreciation or depreciation of non-US units like the euro, pound and yen held in foreign exchange reserves.
Gold reserves increased by $1.3 billion to nearly $60 billion during the week.
Last month, RBI Governor Shaktikanta Das said that the central bank is focused on building robust buffers of foreign currency reserves through its intervention in the dollar-rupee currency market.
"It's our prime focus to build up a strong umbrella in the form of substantial quantum of forex reserves, which will help us when the cycle turns or when it rains heavily," Das said.
India remains the fourth-highest foreign exchange reserve holder in the world. The reserves are equivalent to around 11 months of imports projected for fiscal 2025 and about 99% of total external debt outstanding at the end of March, the central bank said in its July bulletin.
The rupee has begun to gain in July on the back of strong capital inflows, barring intermittent corrections, in spite of an increase in the trade deficit and firming international crude prices weighing on the downside, the RBI said. Currency hedging costs have, accordingly, become lower than earlier.
