India’s foreign exchange reserves reached a four-month high of $707 billion in August, driven by strong inflows and targeted Reserve Bank of India interventions aimed at stabilising the rupee and boosting external buffers.
India’s foreign exchange reserves climbed to a four-month high of $707bn as of August 7, after a sharp weekly increase that pointed to stronger inflows and the Reserve Bank of India’s efforts to steady the balance of payments. The central bank said reserves rose by $14.1bn in the week, the biggest jump since January, led by a $9.9bn increase in foreign currency assets.
The latest figure extends a run of gains that has added about $40bn to reserves over the past six weeks. Reuters-linked market reporting has tied the rise to measures announced in June to attract dollar inflows, including discounted hedging facilities for overseas borrowings by state-run firms and banks, tax cuts on foreign investment in government bonds and a free hedging facility for banks raising overseas foreign currency deposits.
Those steps appear to have been effective. Between June 8 and July 31, the swap facilities drew more than $40bn, while foreign investors bought more than $2.5bn of Indian government bonds through the fully accessible route, according to the data cited by market reports. Analysts also say RBI intervention to support the rupee may have offset some of the inflow, underscoring the central bank’s preference for limiting volatility rather than defending a fixed exchange rate.
The move marks a recovery from the mid-June dip in reserves, when India’s stockpile fell to $671.63bn after a sharp drop in gold holdings, even though foreign currency assets held up. Since then, gold, foreign currency assets, special drawing rights and the IMF reserve position have all contributed to the rebound, leaving India with a larger buffer against external shocks and sudden capital outflows.
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