India’s foreign exchange reserves jumped by $4.5 billion to reach $690.62 billion for the week ended May 9, according to data released by the Reserve Bank of India (RBI) on Friday.
Foreign currency assets, the largest component of the reserves, rose by $196 million to $581.37 billion. These assets, expressed in US dollar terms, reflect the impact of appreciation or depreciation in other currencies such as the euro, pound, and yen that are part of the reserves.
Gold reserves also saw a modest increase, rising by $4.5 million to $86.33 billion during the reporting week.
However, special drawing rights (SDRs) declined by $26 million to $18.53 billion, while India’s reserve position with the International Monetary Fund (IMF) fell by $134 million to $4.37 billion, the RBI data showed.
A strengthening foreign exchange reserve position bolsters the rupee against the US dollar and reflects the strong fundamentals of the Indian economy. It also provides the RBI with greater flexibility to manage volatility in the currency markets.
A robust forex kitty allows the central bank to intervene in the spot and forward markets by releasing dollars to curb excessive depreciation of the rupee. On the other hand, a declining reserve base limits the RBI’s ability to defend the currency during turbulent periods.
Meanwhile, India’s external sector continues to gain momentum, with total exports of goods and services registering a strong 12.7% growth in April, reaching $73.80 billion, compared to $65.48 billion in the same month last year. This growth comes despite global economic uncertainties triggered by US tariff hikes, according to data released by the Commerce Ministry on Thursday.
Merchandise exports alone grew by 9.03% to $38.49 billion, driven largely by high-value electronics and engineering goods, underscoring the expansion of India’s manufacturing sector.
Electronic goods exports rose sharply by 39.51% to $3.69 billion in April, up from $2.65 billion a year ago. Engineering goods exports climbed by 11.28% to $9.51 billion, compared to $8.55 billion last April. Exports of gems and jewellery also increased by 10.74% to $2.5 billion, up from $2.26 billion in the corresponding period last year.
— IANS