India's Forex Reserves Rise for Fourth Consecutive Week, Up 3.1% in FY25

India's foreign exchange reserves rose for the fourth straight week, reaching $665.4 billion as of March 28, according to the latest data from the Reserve Bank of India. This marks a near five-month high, reflecting a $6.6 billion rise in the latest reporting week.

The reserves have now gained a total of $26.7 billion over the past four weeks, driven by RBI's market intervention and foreign investor inflows into Indian debt. In FY25, India's forex reserves have risen by 3.1%, despite global market fluctuations.

However, despite this recent rise, India’s forex reserves remain below their all-time high of $704.88 billion, recorded in September 2024. The decline from this peak was primarily due to RBI’s interventions to stabilise the rupee amid persistent foreign portfolio outflows and global economic uncertainties.

The appreciation of the rupee in the latest reporting week, by 0.6% against the US dollar, was largely supported by the return of foreign capital to Indian markets. However, on a broader scale, the rupee has depreciated by 2.4% in FY25, reflecting pressures from a stronger US dollar and fluctuations in global capital flows.

Addressing concerns about forex reserve fluctuations, Finance Minister Nirmala Sitharaman reassured Parliament on Tuesday that India's foreign exchange reserves remain robust and sufficient to manage the country's current account deficit. She emphasised that India's large forex buffer ensures financial stability and enables the country to meet external obligations without excessive reliance on borrowing.

Forex reserves play a critical role in stabilising the rupee, mitigating external shocks, and maintaining investor confidence. With global uncertainties persisting, the RBI's ability to manage reserves effectively remains crucial for sustaining India’s financial stability.