India’s Forex Reserves Soar by $4.5 Billion to Cross $702 Billion as Gold Reserves Shine Bright

India's forex reserves surged by $4.496 billion to $702.28 billion for the week ending October 17, buoyed by a sharp rise in gold reserves. Despite a dip in foreign currency assets, the rise in gold holdings and SDRs helped maintain strong forex reserve levels, marking a key economic milestone.

India’s foreign exchange reserves experienced a significant boost, climbing by $4.496 billion to reach a robust $702.28 billion during the week ending October 17, as per the latest Reserve Bank of India (RBI) data. This increase marks the first uptick after four weeks of consecutive declines, reflecting strengthened economic resilience amid global uncertainties.

The key driver behind this surge was a notable jump in gold reserves, which swelled by $6.181 billion to $108.546 billion. This sharp rise was fueled by increasing global gold prices and the RBI’s continuous purchases to bolster its safe-haven assets. Gold now constitutes nearly 15% of India’s total forex reserves, the highest share seen since the late 1990s.

While gold reserves grew significantly, foreign currency assets (FCA) — the largest component of the reserves — declined by $1.692 billion to $570.411 billion. This drop was influenced by fluctuations in major currencies such as the euro, pound, and yen against the US dollar. Despite this, the overall holdings stayed firmly above the $700 billion mark, a psychologically and financially important level for the country.

Special Drawing Rights (SDRs), an IMF reserve asset, also saw a modest increase of $38 million to $18.722 billion. Conversely, India's reserve position with the IMF marginally decreased by $30 million to $4.602 billion during the week.

Analysts note that the RBI’s strategy has shifted towards favoring gold over dollar assets, including a reduction in US Treasury securities holdings. This aligns with a global trend where central banks are increasing gold reserves amid geopolitical tensions and trade uncertainties.

The surge in India’s forex reserves underscores the country’s growing economic stability and preparedness to manage external shocks. It also reassures investors about India's ability to maintain currency stability and navigate volatile global financial markets.

Forex Reserve Growth

Forex reserves rose by $4.496 billion, reaching $702.28 billion, first rise after four weekly declines.
Gold reserves increased sharply by $6.181 billion to $108.546 billion, driven by price rise and RBI purchases.

Currency Assets and SDRs

Foreign currency assets slipped $1.692 billion to $570.411 billion due to currency valuation impacts.
Special Drawing Rights edged up by $38 million to $18.722 billion; IMF reserve position fell $30 million.

RBI Strategy and Global Context

RBI favors gold reserves over US dollar assets, reducing Treasury holdings.
Gold's proportion in reserves nearly doubled over the decade, reflecting safe-haven demand amid geopolitical risks.

Economic Implications

Strong forex reserves enhance India’s ability to manage currency fluctuations and external shocks.
Crossing $700 billion marks a milestone solidifying economic confidence amid global uncertainty.

Sources Reserve Bank of India (RBI), Economic Times, Business Standard, Xinhua, Times of India, DD News

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