Mumbai: India’s foreign exchange reserves surged by $6.6 billion to a five-month high of $665.4 billion for the week ended on March 28, 2025, data released by the Reserve Bank of Indian on Friday showed.
According to the RBI’s Weekly Statistical Supplement, the country’s gold reserves which also form part of the forex kitty went up by $519 million to $77.8 billion.
This is the fourth consecutive week of rise in the forex reserves kitty after the increase of $4.5 billion to $658.8 billion in the preceding week that ended on March 21. The declining trend of earlier weeks due to revaluation and forex market interventions by the RBI to help reduce volatility in the rupee has now been reversed in the last four weeks.
Earlier, the country’s forex reserves had increased to an all-time high of $704.885 billion in September 2024.
Any strengthening of the country’s foreign exchange kitty also helps bolster the rupee vis-a-vis the US dollar, which is good for the economy. With the recent increase in foreign exchange reserves, the rupee has also emerged stronger.
An increase in the foreign exchange reserves reflects strong fundamentals of the economy and gives the RBI more headroom to stabilise the rupee when it turns volatile.
A strong forex kitty enables the central bank to intervene in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall.
Conversely, a declining forex kitty leaves the RBI less space to intervene in the market to prop up the rupee.
Meanwhile, India’s merchandise trade deficit has narrowed to an over 3-year low at $14.05 billion in February from $22.99 billion in January as exports held steady during the month while imports declined, according to the latest data compiled by the Ministry of Commerce and Industry. This reflects a strengthening of the external sector of the economy despite geopolitical tensions triggering economic uncertainty in the world market.
The country’s merchandise exports increased by 1.3 per cent to $36.91 billion in February, as compared to $36.43 billion in January, while imports fell by 16.3 per cent to $50.96 billion compared with $59.42 billion in the previous month.
(IANS)
