By: ENS Economic Bureau | New Delhi | Published: August 8, 2020 1:02:39 am
Experts say that in times of dwindling economic activity and growth, the rising forex reserves provide a lot of strength as they now cover one-year of import expenditure. (Representational Image)
India’s foreign exchange reserves jumped by a record $11.9 billion in the week ended July 31 to hit a fresh high of $534.5 billion. In fact, over the last 10 months, the country’s forex reserves have swelled by $100 billion. Driven by a rise in foreign portfolio investment (FPI) and foreign direct investment (FDI), the reserves have been supported by dip in import bill on account of ruling low crude oil prices, decline in gold and other imports on account of COVID-19.
Reserve Bank of India (RBI) data released on Friday shows that in the week ended July 31, the foreign currency assets expanded by $10.3 billion to $490.8 billion. Even the gold reserves were up by $1.5 billion to $37.6 billion.
While the rising foreign exchange reserves provide cushion to the economy in terms of covering the import expenditure, it has also resulted into stability in rupee against the dollar. While the rupee hit a low of 76.97 against the dollar on April 21, 2020, it has recovered over the last three months and closed at 74.93 on Friday. Between April 1 and July 31, the reserves have risen by $60 billion.
Forex reserves so far in FY21
“It is this swelling of foreign exchange reserves that in combination with benign oil prices and tepid imports, leading to a current account surplus, has helped the Indian rupee to remain broadly stable since mid-March 2020, despite deterioration in some of the other macro parameters such as retail inflation, fiscal deficits and negative GDP growth,” said a report by India Ratings last week.
It is important to note that gold, which was a big import component for India, witnessed a sharp decline in the quarter ended June 2020, following the skyrocketing prices and the lockdown induced by the COVID-19 pandemic.
According to the World Gold Council (WGC), gold imports plummeted by 95 per cent to 11.6 tonnes in the quarter as compared to 247.4 tonnes in the same period a year ago, due to logistical issues and poor demand. WGC also pointed that the value of gold transacted during the June quarter fell to Rs 26,600 crore, down by 57 per cent as against Rs 62,420 crore a year ago.
Experts say that in times of dwindling economic activity and growth, the rising forex reserves provide a lot of strength as they now cover one-year of import expenditure. India’s forex reserves began rising significantly from September 2019. While the reserves stood at 433.6 billion in the week ended September 27, 2019, it has risen by $100 billion over last 10 months.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines
For all the latest Business News, download Indian Express App.
© The Indian Express (P) Ltd