Forex Update: India’s foreign exchange reserves increased to $604 billion as on December 1, surpassing the $600 billion mark after a gap of about four months. The country’s forex reserves were last above the $600 billion mark on August 11 this year.
While unveiling the December 2023 bi-monthly monetary policy on Friday, RBI Governor Shaktikanta Das said, “India’s foreign exchange reserves stood at $604 billion as on December 1, 2023. We remain confident of meeting our external financing requirements comfortably.”
The reserves were $597.935 billion in the preceding week ended November 24.
In October 2021, the country’s foreign exchange kitty had reached an all-time high of $642 billion. The reserves took a hit as the central bank deployed the reserves to defend the rupee amid pressures caused majorly by global developments since last year.
The governor further said the Indian rupee has exhibited low volatility compared to emerging market economy (EME) peers in the calendar year 2023, despite elevated US treasury yields and a stronger US dollar.
“The relative stability of the Indian rupee reflects the improving macroeconomic fundamentals of the Indian economy and its resilience in the face of formidable global tsunamis,” he said.
The coefficient of variation for the daily INR exchange rate vis-à-vis the US dollar was 0.66 (CY 2023), which is the lowest among peer emerging economies, including China, Malaysia, Russia, Turkey, Vietnam, South Africa and Thailand.
On the financing side, Das said foreign portfolio investment (FPI) flows have seen a significant turnaround in 2023-24 with net FPI inflows of USD 24.9 billion (up to December 6) as against net outflows in the preceding two years.
Net foreign direct investment (FDI), on the other hand, moderated to USD 10.4 billion in April-October 2023, from USD 20.8 billion a year ago.
Net inflows under external commercial borrowings (ECBs) and non-resident deposit accounts are much higher than last year.
India’s external vulnerability indicators exhibit higher resilience in comparison with EME peers.
Meanwhile, during the week ended November 24, India’s forex reserves increased for the second week in a row and jumped $2.538 billion to hit a three-month high of $597.935. In the week before that, the overall reserves had jumped $5.077 billion to $595.397 billion.
The country’s gold reserves as on November 24 stood at $46.338 billion during the week, while the special drawing rights (SDRs) were at $18.218 billion. India’s reserve position with the IMF stood at $4.848 billion in the reporting week.
Changes in foreign currency assets are caused by the RBI’s intervention as well as the appreciation or depreciation of foreign assets held in the reserves.
(With PTI Inputs)
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