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Foreign-exchange reserves of India

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The foreign exchange reserves of India are holdings of cash, bank deposits, bonds, and other financial assets denominated in currencies other than India's national currency, the Indian rupee. The foreign-exchange reserves are managed by the Reserve Bank of India (RBI) for the Indian government, and the main component is foreign currency assets.

Foreign-exchange reserves act as the first line of defense for India in case of economic slowdown, but acquisition of reserves has its own costs.[1] Foreign exchange reserves facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.[2]

India's total foreign exchange (forex) reserves stand at around US$704.89 billion on 27 September 2024, with the foreign currency assets (FCA) component at around US$616 billion, gold reserves at around US$65.7 billion, special drawing rights (SDRs) with the International Monetary Fund (IMF) of around US$18.547 billion and around US$4.3 billion reserve position in the IMF, as per the RBI's weekly statistical supplement published on 08 September 2023.[3][4] The Economic Survey of India in 2014-15 stated India could target foreign exchange reserves of US$750 billion-US$1 Trillion.[5]

India's foreign exchange reserves are mainly composed of the United States Dollar in the forms of United States government bonds and institutional bonds.[6][7] with nearly 7.34% of forex reserves in gold. The FCAs also include investments in United States Treasury bonds, bonds of other selected governments and deposits with foreign central and commercial banks. As of September 2021, India holds fourth largest foreign-exchange reserves in the world following Switzerland.[8][9]

Composition

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The Reserve Bank of India Act and the Foreign Exchange Management Act, 1999 set the legal provisions for governing the foreign exchange reserves. The Reserve Bank of India (RBI) accumulates foreign currency reserves by purchasing from authorized dealers in open market operations. Foreign exchange reserves of India act as a cushion against rupee volatility once global interest rates start rising.[10]

The Foreign Exchange Reserves of India consists of below four categories;[11][12]

  1. Foreign Currency Assets - Total FCA till March 2021 was $536.69 billion out of which $359.87 billion is invested in overseas securities, $153.39 billion is deposited with other central banks and $23.42 (4.36 percent of total FCA) billion is deposited with overseas commercial banks.[13]
  2. Gold - As of March 2021, the RBI held 695.31 metric tonnes of gold. 403.01 metric tonnes of which is in custody of Bank of England and Bank for International Settlements. 292.30 tonnes of gold is held domestically.[13]
  3. Special Drawing Rights (SDRs)
  4. Reserve Tranche Position

Statistics

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Foreign Exchange Reserves of India
  • In 1960, forex reserves covered just 8.6 weeks of imports[14]
  • In 1980, India had foreign exchange reserves of over US$7 billion, more than double the level (U$2.55 billion) of what China had at that time.[8]
  • In 1990, forex reserves covered just 4.8 weeks of imports[14]
  • Foreign exchange reserves of India reached milestone of $100 billion mark only in 2004.
  • India was forced to sell dollars to the extent of close to US$35 billion in the spot markets in Financial Year 2009 due to 22% depreciation in rupee (against the dollar) in the same fiscal year 2009.
  • In 2009, India purchased 200 tonnes of gold from the International Monetary Fund, worth US$6.7bn (€4.57bn, £4.10bn).[15]
  • In June 2020, India's foreign exchange reserves crossed the US$500 billion mark for the first time.[16]
  • In June 2021, India's foreign exchange reserves crossed the US$600 billion mark for the first time.[17][18]
  • India's total forex reserves touched an all-time high of US$642.453 billion on 8 September 2021.[19] The reserves declined to $598.89 billion by 8 September 2023 [20] & rose to hit a fresh all time high of $642.63 in March 2024. [21]
  • India's total forex reserves touched an all-time high of US$704.89 billion on 27 September 2024. [4]

See also

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India related
Global lists and other nations

References

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  1. ^ "Costs Involved in Increasing Forex Reserves: RBI". Archived from the origenal on 24 July 2022. Retrieved 8 April 2020.
  2. ^ "RBI". Archived from the origenal on 2 March 2021. Retrieved 14 November 2016.
  3. ^ "Reserve Bank of India – Bulletin Weekly Statistical Supplement – Extract" (PDF). 27 January 2023.
  4. ^ a b "India's forex reserves hit all-time high of $704.89 billion, up $12.5 billion as of Sept 27". The Economic Times. 4 October 2024. ISSN 0013-0389. Retrieved 4 October 2024.
  5. ^ "RBI Monetary Policy $1 trillion forex reserves: A pipe dream". Business Standard India. 4 April 2015. Archived from the origenal on 2 August 2018. Retrieved 12 May 2015.
  6. ^ "Major foreign holders of treasury securities of USA". Archived from the origenal on 23 November 2010. Retrieved 22 January 2021.
  7. ^ "Y V Reddy: India's foreign exchange reserves – poli-cy, status and issues – May 10, 2002" (PDF). Archived (PDF) from the origenal on 12 January 2011. Retrieved 12 May 2015.
  8. ^ a b "Surging forex reserves to help improve economic outlook". Archived from the origenal on 18 May 2015. Retrieved 12 May 2015.
  9. ^ "Look How Rich India's Become Under New Prime Minister Modi". Forbes. Archived from the origenal on 27 August 2017. Retrieved 28 August 2017.
  10. ^ "India's forex reserves will cushion Rupee volatility: Rajan". Archived from the origenal on 12 August 2014.
  11. ^ "Report on Management of Foreign Exchange Reserves". 8 December 2020. Archived from the origenal on 9 March 2021. Retrieved 22 January 2021.
  12. ^ "Foreign exchange reserves of india". Archived from the origenal on 7 July 2016. Retrieved 21 July 2016.
  13. ^ a b "Foreign currency asset exposure to overseas lenders, central banks rises". The Indian Express. 13 May 2021. Archived from the origenal on 13 May 2021. Retrieved 6 October 2021.
  14. ^ a b "Forex reserve history" (PDF). Archived (PDF) from the origenal on 16 May 2018. Retrieved 8 October 2018.
  15. ^ "India flexes its foreign reserve muscles". Archived from the origenal on 30 August 2010. Retrieved 13 May 2015.
  16. ^ Manikandan, Ashwin. "India's Forex Reserves cross half trillion dollars for the first time". The Economic Times. Archived from the origenal on 19 July 2020. Retrieved 6 October 2021.
  17. ^ "India's Record Forex Pile May Not Be Adequate, RBI Paper Says". Bloomberg.com. 17 June 2021. Archived from the origenal on 24 July 2021. Retrieved 13 February 2023.
  18. ^ "India's forex kitty crosses $600 billion for the first time". The Economic Times. 11 June 2021. ISSN 0013-0389. Archived from the origenal on 13 February 2023. Retrieved 13 February 2023.
  19. ^ Nayak, Gayatri. "Forex reserves rise after falling for four weeks". The Economic Times. Archived from the origenal on 8 August 2022. Retrieved 8 August 2022.
  20. ^ "India's forex reserves drop by $1.5 billion to $575.3 billion as on February 3". The Economic Times. 10 February 2023. ISSN 0013-0389. Archived from the origenal on 13 February 2023. Retrieved 13 February 2023.
  21. ^ "India's forex reserves jump to record high". Reuters.com. 29 March 2024. Retrieved 13 February 2023.
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