India’s foreign exchange reserves have once again crossed the $700 billion mark, inching closer to their all-time high. According to data released by the Reserve Bank of India (RBI) on July 4, the reserves rose by $4.84 billion to $702.78 billion during the week ending June 27.
This puts India’s forex buffer just short of its record high of $704.89 billion, which was seen in late September 2024.
🔍 What’s Driving the Rise?
The increase was mainly due to a jump in foreign currency assets, which climbed $5.75 billion to reach $594.82 billion. However, gold reserves fell by $1.23 billion to $84.5 billion during the same period.
Foreign currency assets include not only U.S. dollars but also euros, pounds, and yen. Their valuation reflects global currency movements and exchange rates.
In addition:
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Special Drawing Rights (SDRs) rose by $158 million to $18.83 billion.
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India’s reserve position with the IMF increased by $176 million to $4.62 billion.
📉 Forward Book Declines
Despite the headline growth in reserves, India’s forward dollar book — a measure of future dollar obligations — fell by $19 billion in April and May. It stood at $65.2 billion in May, down from a peak of $88.7 billion in February.
The RBI’s net dollar sales, however, were modest at $3.2 billion during this period. The drop in forward positions reflects lower dollar demand commitments in the near future.
💱 Rupee Stability and RBI’s Role
The Indian rupee has faced volatility in recent months due to global trade tensions and fluctuating oil prices. The RBI has actively intervened in the forex market — buying dollars when the rupee is strong, and selling when it weakens — to ensure stability and prevent sharp depreciation.
📦 How Strong is India’s Forex Position?
According to RBI Governor Sanjay Malhotra, India’s reserves are now enough to:
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Cover 11 months of imports
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Pay 96% of external debt
This strong external position boosts investor confidence, shields India from global financial shocks, and supports the rupee.
Just a few months ago, in January 2025, reserves had slipped to around $624 billion, their lowest level in over a year. The current rebound signals renewed strength in India’s external finances.
