India’s forex reserves reached an unprecedented milestone in 2024, surging by $12.6 billion to cross the $700 billion mark for the first time. This marks the culmination of a steady climb over seven consecutive weeks, as per data released by the Reserve Bank of India (RBI).
Record High in Reserves
The overall reserves grew by $2.838 billion in the previous week to $692.296 billion. However, in the week ending September 27, they surged by $12.59 billion, setting an all-time high of $704.885 billion, according to RBI statistics.
This milestone positions India as the fourth economy globally to hold foreign exchange reserves exceeding $700 billion.
Key Components of Forex Reserves Growth
The increase in foreign currency assets (FCA), which form a substantial part of the reserves, contributed significantly to the rise. FCA expanded by $10.46 billion, reaching $616.154 billion.
Foreign currency assets are maintained as a multi-currency portfolio, including the US dollar, Euro, Pound sterling, and Japanese yen. These assets are valued in terms of US dollars.
Gold reserves also saw a substantial increase, rising by $2.184 billion to $65.796 billion during the reporting week.
Factors Behind the Surge in Forex Reserves
VRC Reddy, Head of Treasury at Karur Vysya Bank, attributed the increase in reserves to robust foreign institutional investor (FII) inflows into equity and debt markets. He highlighted that the inclusion of Indian bonds in the JP Morgan bond index played a pivotal role.
Additionally, the appreciation of major currencies such as the Euro and GBP against the US dollar further contributed to the surge in reserves.
Outlook for the Future
Rahul Bajoria of BofA Securities projected further growth in foreign reserves, estimating them to reach $707 billion by March 2025 and $745 billion by March 2026. He noted, “The prospects of a larger war chest appear bright, driven by falling crude oil prices and rising equity and debt-related inflows.”
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