India's Foreign Exchange Reserves: A Strong Buffer

According to the Reserve Bank of India (RBI), the country's foreign exchange reserves are sufficient to cover more than 11 months of imports and approximately 96% of external debt as of end-June 2024.

The RBI's bulletin highlighted an increase of $6.4 billion in forex reserves during 2024-25, reaching $652.9 billion as of December 13, 2024. This robust position reflects sustainable levels of reserve adequacy metrics, despite a decline in reserves over the past 11 weeks.

In the week ending December 13, forex reserves dropped by $1.988 billion to $652.869 billion. The decline from the all-time high of $704.89 billion in September is likely due to RBI interventions to prevent a sharp depreciation of the Rupee. A substantial reserve buffer helps protect domestic economic activity from global shocks.

India's foreign currency assets, the largest component of forex reserves, stood at $562.576 billion. In 2023, India added around $58 billion to its reserves, contrasting with a cumulative decline of $71 billion in 2022. The RBI closely monitors foreign exchange markets, intervening only to maintain orderly market conditions and curb excessive volatility in the Rupee exchange rate.