India Climbs to 4th Place in Global Foreign Exchange Reserves, Surpassing $704 Billion

India has secured its position as one of the world’s largest holders of foreign exchange reserves, now ranking fourth globally, following China, Japan, and Switzerland. According to data from the Reserve Bank of India (RBI), the country’s foreign exchange reserves rose by USD 12.588 billion in just one week, reaching a record high of USD 704.885 billion as of September 27. Despite this significant increase, reserves have decreased from their peak levels observed last month.

The decline in reserves is attributed to the RBI’s active measures to mitigate a sharp depreciation of the Indian rupee. A robust buffer of foreign exchange reserves is crucial for shielding the domestic economy from external shocks. Current estimates suggest that these reserves are adequate to cover more than a year’s worth of projected imports.

India’s economic landscape is continuously evolving, transforming from being categorized as part of the “Fragile Five”—a term used to describe economies vulnerable to external factors—to being recognized as the fastest-growing major economy. This transformation serves as a model for other developing nations.

The RBI plays a pivotal role in monitoring foreign exchange markets, intervening strategically to ensure stability and prevent excessive volatility in the currency exchange rates. Its interventions typically include liquidity management techniques, such as dollar sales, to curb significant fluctuations in the rupee’s value, without adhering to a fixed target level.