India’s foreign exchange reserves have increased by $66 billion this year as they continue to rise for months and have touched several record highs. India’s foreign exchange fund currently stands at $689,235 billion. Moreover, as per the latest RBI data, the largest component of foreign exchange reserves, foreign currency assets (FCA), stood at $604,144 points. Moreover, gold reserves currently stand at $61,988 billion.
The huge foreign exchange stock acts as a buffer to prevent domestic economic activity from being affected by global shocks. According to estimates, India’s current foreign exchange stock is sufficient to cover about one year of projected imports. It is noteworthy that in the year 2023, the country added around $58 billion to its foreign exchange stock. In contrast, India’s foreign exchange reserves saw a decline of $71 billion in 2022. Considering that, the current trend shows India’s sound economic management and rising exports.
Foreign exchange reserves, or foreign exchange reserves, are assets held by a country’s central bank or monetary authority. Foreign exchange reserves are typically held in reserve currencies, typically the US dollar and, to a lesser extent, the euro, Japanese yen, and British pound.
With due consideration, the RBI keeps a close watch on the foreign exchange markets and intervenes only to maintain orderly market conditions. The primary objective of such intervention is to contain excessive volatility in the exchange rate without reference to any predetermined target level or band. The RBI intervenes in the market through liquidity management, which also includes sale of dollars, to prevent a depreciation of the rupee. Today, the Indian rupee has earned a reputation as one of the most stable currencies in Asia. In contrast, the rupee was one of the most volatile currencies a decade ago.
(With ANI inputs)
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