India's forex reserve up $445mn

India’s foreign exchange reserves increased by $445.4 million in the week ended August 24, taking the country’s total reserves to $401.29 billion, according to official data released on Friday.

The latest figures from the Reserve Bank of India’s (RBI) weekly statistical supplement showed that the reserves stood at $400.85 billion in the previous week ended August 17.

India’s forex reserves are made up of four major components — foreign currency assets (FCAs), gold reserves, special drawing rights (SDRs), and the country’s reserve position with the International Monetary Fund (IMF).

Foreign currency assets, which form the largest share of India’s reserves, increased by $386.6 million during the week to $376.59 billion.

FCAs are not limited to US dollar holdings. They also include assets denominated in several other major international currencies, helping India maintain diversification in its external reserves.

The country’s gold reserves also recorded an increase, rising by $35.7 million to $20.76 billion during the week.

Meanwhile, India’s holdings of SDRs rose by $8.6 million to $1.47 billion. The country’s reserve position with the IMF also improved by $14.5 million, reaching $2.46 billion.

The level of forex reserves is an important indicator of a country’s external financial strength. Adequate reserves provide the RBI with a cushion to manage external shocks, meet international payment obligations and help maintain stability in the foreign exchange market during periods of global financial volatility.