For the first time ever, forex exchange reserves crossed the $400-billion mark as on September 8 to reach $400.727 billion, data from the Reserve Bank of India show. The central bank took almost a decade to shore up its forex kitty by $100 billion to cross $400 billion from $300 billion. Compared with this, the RBI took just 11 months to reach the $300-billion mark in February 2008 from $200 billion of reserves it had in April 2007.
Reserves rose by a whopping $2.6 billion as on September 8 from the week before. Foreign currency assets, which form a key component of reserves, rose by $2.57 billion from the previous week to $376.209 billion.
FCAs are maintained in major currencies such as US dollar, euro, pound sterling, yen, etc. any movement in FCAs occurs mainly on account of purchase and sale of foreign exchange by the RBI, income arising out of deployment of foreign exchange reserves, external aid receipts of the government and revaluation of assets.
Gold reserves remained stable at $20.69 billion. Special drawing rights (SDR) from the International Monetary Fund rose by $14.2 million from the previous week to $1.52 billion. SDR is an international reserve asset created by the IMF and is allocated to its members in proportion of their quota at the multilateral agency. The reserve position in the IMF rose by $21.4 million to $2.3 billion.
Currently, reserves take care of approximately 12 months of imports; in the past, reserves covered seven to eight months of imports. Interestingly, India has seen the third-highest reserves accretion globally after Switzerland and China so far in 2017.
Strong foreign portfolio investment into Indian debt and equity this year – to the tune of $27 billion – and a weakening dollar gave ample opportunities to the central bank to shore up its reserves.