India Sees A Surge In Forex Reserves, Kitty Crosses $690.6 Billion

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.

Conversely, a declining forex kitty leaves the RBI less space to intervene in the market to prop up the rupee.

Source : Pixabay

India's foreign exchange reserves surged by $4.5 billion to $690.62 billion for the week ended May 9, RBI data released on Friday showed.

Foreign currency assets, a major component of the reserves, increased by $196 million to $581.37 billion.

Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound, and yen held in the foreign exchange reserves. Gold reserves, which also constitute part of the forex reserves, increased by $4.5 million to $86.33 billion during the week, the RBI statement said.

The special drawing rights were, however, down $26 million to $18.53 billion. India's reserve position with the IMF was also down $134 million at $4.37 billion in the reporting week, the apex bank data showed.

Any strengthening of the country’s foreign exchange kitty also helps bolster the rupee vis-a-vis the US dollar.

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 RBI 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 external sector has emerged stronger with total exports of goods and services clocking a robust 12.7 per cent growth in April to touch the $73.80 billion mark compared with the corresponding figure of $65.48 billion during the same month last year, despite the global economic uncertainties triggered by the US tariff hikes, according to figures released by the Commerce Ministry on Thursday.

The country’s merchandise exports shot up by 9.03 per cent to $38.49 billion during the month, with high-value electronics and engineering goods registering the highest growth, reflecting the expanding manufacturing base of the country.

Electronic goods exports increased by a whopping 39.51 per cent to $ 3.69 billion in April from $2.65 billion in the same month last year.

Engineering goods exports increased by 11.28 per cent to $9.51 billion during the month, from $8.55 billion in April last year, while gems & jewellery exports increased by 10.74 per cent to $2.5 billion from $2.26 billion.

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)