Amid heavy inflows in the Indian debt and equity markets, India’s foreign exchange reserves rose reaching an over 20-month high of $615.97 billion as of December 15. This has been happening for the fifth week straight. India’s forex reserves jumped $9.112 billion to $615.971 billion in the week ending December 15. According to the RBI, the quantum of increase is one of the highest for a week. In the previous reporting week ending December 8, the reserves had risen $2.816 billion to $606.859 billion. The increase has been primarily attributed to a growth of $8.35 billion in foreign currency assets (FCAs), which account for the appreciation or depreciation of non-US units like the euro, pound, and yen.

In October 2021, the country’s forex reserves reached an all-time high of $645 billion, but suffered a hit as the central bank deployed the reserves to defend the rupee in the midst of pressures caused by global developments.

Gold reserves increased by $446 million to $47.58 billion, while SDRs (Special Drawing Rights) were up by $135 million to $18.32 billion. The Indian debt and equity market witnessed increased net inflows in December with the net inflows swelling up to $9.2 billion in December while the amount stood at $2.9 billion in November.

The Reserve Bank of India’s intervention in forex markets along with valuation changes impact reserves.

Changes in foreign currency assets are expressed in dollar terms and reflects the effect of appreciation or depreciation of other currencies held in its reserves. Foreign exchange reserves also included India’s Reserve Tranche position in the International Monetary Fund. Reserve position in the IMF increased by $181 million to $5.02 billion.

Meanwhile, the rupee hovered between 82.9400 and 83.4050 against the dollar during the said week, the Indian currency’s biggest weekly gain since August 25. The currency settled at 83.14 on December 22, and posted its biggest weekly loss in over two months.

This week, the Indian rupee continued to remain under pressure due to rising prices of crude oil triggered by the evolving geopolitical situation and outflow of foreign funds.