The country’s forex reserves crossed the $600-billion mark for the first time on the back of continued foreign investment flow into the capital markets. According to the RBI, forex reserves increased by $6.8 billion in the week ended June 4 to $605 billion. While India’s forex reserve was $605.008 billion, Russia’s was $605.2 billion.
The increase in the foreign kitty in the reporting week was mainly on the back of a rise in the value of foreign currency assets (FCA) held by the central bank even as the value of gold reserves held by RBI fell. The central bank’s foreign currency assets (FCA), which constitutes a major component of the overall reserves, rose by $7.362 billion to $560.890 billion, RBI data shows. The gold reserves in the reporting week, meanwhile, fell by $502 million to $37.604 billion
The FCA reflects appreciation or depreciation of currencies like the euro, pound and yen held in the foreign exchange reserves, expressed in dollar terms. Typically, the value of FCA for a said week is a function of currency depreciation and the intervention in the currency market by RBI.
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The special drawing rights (SDR) – another component of the forex reserve – fell marginally by $1 million to $1.513 billion. The reserve position with the IMF too reported a decline of $16 million against the previous week to $5 billion, the data showed.
The current level of forex reserves is enough to cover nearly 16 months of imports. According to RBI governor Shaktikanta Das, the central bank has enough ammunition to meet challenges arising out of “global spillovers”, a reference to any sudden policy changes in the US or geopolitical shifts that could lead to funds exiting India.
India’s central bank has been shoring up its foreign reserves for over a year and in the process has leapfrogged Russia and South Korea as the fourth-biggest holder of forex reserves only behind China, Japan, and Switzerland. It took just about a year for the reserves to rise by $100 billion, which has generally been the pace of accumulation since Shaktikanta Das became the governor of the Reserve Bank of India (RBI) in November 2017.
