India's forex reserves surge by $4.5 billion to $658.8 billion

• MUMBAI — India's foreign exchange reserves surged by $4.5 billion to scale a 4-month high of $658.8 billion in the week ended March 28, 2025, according to data released by the Reserve Bank of India on Friday.
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• According to the Weekly Statistical Supplement released by the RBI, Foreign currency assets (FCAs) were down by $1.6 billion to $558.86 billion. Expressed in dollar terms, the FCAs include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.
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• Gold reserves saw a surge of $2.8 billion to $77.2 billion.
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• In the preceding week, that ended on March 14, the country’s forex reserves had risen by $0.305 billion to touch $654.27 billion.
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• This is the third consecutive week of rise in the kitty, which has been on a declining trend recently due to revaluation, along with forex market interventions by the RBI to help reduce volatilities in the rupee. The forex reserves had increased to an all-time high of $704.885 billion in September 2024.
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• Any strengthening of the country's foreign exchange kitty also helps bolster the rupee vis-a-vis the rupee which is good for the economy. With the recent increase in foreign exchange reserves the rupee has also emerged stronger.
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• An increase in foreign exchange reserves reflects the strong fundamentals of the economy and gives the RBI more headroom to stabilise the rupee when it turns volatile.

Also read: Despite geo-political uncertainties, India’s exports set to cross $800 billion

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• 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.
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• Conversely, a declining forex kitty leaves the RBI less space to intervene in the market to prop up the rupee.
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• Meanwhile, India's merchandise trade deficit has narrowed to an over 3-year low at $14.05 billion in February from $22.99 billion in January as exports held steady during the month while imports declined, according to the latest data compiled by the Ministry of Commerce and Industry.
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• This reflects a strengthening of the external sector of the economy despite geopolitical tensions triggering economic uncertainty in the world market.