India’s foreign exchange reserves surged to a record high of $729.3 billion by the end of August, providing the Reserve Bank of India (RBI) with greater firepower to manage pressure on the rupee amid elevated oil prices and global economic uncertainties.
According to data released by the RBI, the country’s forex reserves increased by $12.4 billion during the week, surpassing the previous record of $728.5 billion registered in February. The sharp rise in reserves has been supported by strong foreign currency inflows following measures introduced by the central bank in June to attract overseas capital. These included a special deposit programme aimed at overseas Indians and other non-resident customers.
The measures have attracted around $72.8 billion in inflows through August 21, helping strengthen India’s external position and reducing the risk of a third consecutive year of a deficit in the country’s broadest measure of capital flows.
The increase in reserves also gives the RBI greater room to intervene in the foreign exchange market and support the rupee if necessary.
The Indian currency has recovered around 1.7 per cent from its record low reached in May, but remains under pressure, particularly because of higher crude oil prices and the country’s heavy dependence on imported fuel.