India's foreign exchange reserves surged by $6.295 billion to reach $696.988 billion in the week ended May 8, primarily driven by a significant increase in gold reserves, as per Reserve Bank of India (RBI) data released on Friday.
Recovery After Previous Decline
The overall forex kitty had declined by $7.794 billion to $690.693 billion in the previous reporting week. The latest data signals a recovery, with reserves rebounding strongly.
Historical Context
India's reserves had touched an all-time high of $728.494 billion in the week ended February 27 before coming under pressure following the onset of the Middle East conflict. This geopolitical tension triggered sustained RBI interventions in the forex market to support the rupee, leading to a drawdown in reserves.
Component-wise Breakdown
According to RBI data, foreign currency assets (FCAs), the largest component of the reserves, increased by $562 million to $552.387 billion during the reporting week. Expressed in dollar terms, FCAs include the impact of appreciation or depreciation of non-US currencies such as the euro, pound, and yen held in the reserves.
Gold Reserves Lead the Surge
Gold reserves recorded the sharpest increase, rising by $5.637 billion to $120.853 billion during the week. This surge was the primary driver behind the overall rise in forex reserves.
Other Components
The value of Special Drawing Rights (SDRs) increased by $84 million to $18.873 billion, while India's reserve position with the International Monetary Fund (IMF) rose by $12 million to $4.875 billion, according to the RBI data.
This comprehensive increase across multiple components underscores the strength of India's external position amidst global uncertainties.
