Priyanka Tiwari
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After weeks of decline, India's foreign exchange reserves have witnessed a substantial increase for the third consecutive week, bringing much-needed relief. In the week ending February 7, 2025, forex reserves surged by $7.65 billion, reaching a total of $638.26 billion. The Reserve Bank of India (RBI) confirmed this upward trend, highlighting a positive shift in the country’s financial stability.
Forex Reserves Previously at Record High Levels
Before this recent uptick, India’s forex reserves had seen a decline due to RBI’s interventions aimed at stabilizing the rupee. However, in the week ending January 31, reserves had already shown signs of recovery, increasing by $1.05 billion to $630.607 billion. Historically, India had reached an all-time high forex reserve level of $704.885 billion in September 2024.
Major Growth in Foreign Currency Assets (FCA)
RBI data reveals that a significant portion of the increase in reserves came from foreign currency assets (FCA), which grew by $6.42 billion, reaching $544.11 billion. These assets include currencies like the Euro, Pound, and Yen, whose valuation fluctuations impact total reserves. Additionally, the value of gold reserves saw a notable rise of $1.31 billion, bringing the total to $72.21 billion.
Special Drawing Rights and IMF Reserve Position
Special Drawing Rights (SDR) with the International Monetary Fund (IMF) also saw a slight increase of $11 million, reaching $17.88 billion. However, India’s reserve stock with the IMF decreased by $71 million to $4.07 billion in the same period.
Economic Stability and Inflation Control
The rise in forex reserves is a crucial indicator of economic stability. Higher reserves strengthen the country's ability to absorb external financial shocks, make imports cheaper, and assist in controlling inflation. The improved forex position boosts investor confidence and ensures that the economy remains resilient against global uncertainties.
Pakistan's Reserves Take a Hit
Interestingly, while India's forex reserves were fluctuating, Pakistan had seen an increase in its reserves. However, recent reports suggest that Pakistan is now facing a decline. During the same week ending February 7, Pakistan’s foreign exchange reserves fell by $181.5 million, bringing its total reserves down to $15.862 billion. This decline underscores the financial struggles of India’s neighboring country amid ongoing economic challenges.
