India's Forex Reserves Witness Significant Growth

India's foreign exchange reserves have seen a notable increase of $4.553 billion, reaching a total of $690.617 billion for the week ending May 9. This surge is primarily attributed to a significant rise in gold assets, as reported by the Reserve Bank of India (RBI).

Details of the Reserves Composition

Foreign currency assets (FCAs), the largest component of the forex reserves, experienced a modest increase of $196 million, totaling $581.373 billion. The valuation of FCAs is influenced by the fluctuation of non-US currencies such as the euro, pound, and yen.

Gold reserves played a pivotal role in this growth, with an impressive increase of $4.518 billion, bringing the total to $86.337 billion. Conversely, Special Drawing Rights (SDRs) and India's reserve position with the IMF saw declines of $26 million and $134 million, respectively.

Management of Forex Reserves

The RBI actively manages these reserves, which are predominantly held in major currencies like the US dollar, with minor allocations in euro, yen, and pound sterling. The central bank's strategy includes selling dollars during rupee weakness and accumulating reserves when the rupee strengthens.