India Crosses $700 Billion in Forex Reserves, Joining Global Elite

India’s foreign exchange reserves have surpassed the $700 billion mark for the first time, increasing by $12.6 billion during the week ending September 27, according to the Reserve Bank of India (RBI). This milestone makes India the fourth country to achieve this, alongside China, Japan, and Switzerland.

Fast Growth in Reserves

India’s reserves have grown steadily over the years. The first $100 billion milestone was reached in December 2003, but the path to $400 billion took over nine years. In contrast, the recent growth to $700 billion has been driven by stable oil prices and strong inflows into Indian stocks and bonds.

Future Growth Projections

Analysts at BofA Securities predict that India’s reserves could reach $745 billion by March 2026, citing a strong balance of payments surplus. The RBI’s focus on building a buffer against external risks has contributed to this growth, as the country continues to accumulate reserves at a rapid pace under Governor Shaktikanta Das.

Past Volatility and Record-Breaking Increases

India’s forex reserves reached $642 billion in September 2021 before dropping to $525 billion due to revaluation losses. Despite these fluctuations, India’s reserve adequacy remains strong compared to other emerging markets, supported by a consistent balance of payments surplus.

RBI’s Role in Market Stability

The RBI uses its reserves to stabilize the currency market and mitigate volatility in the rupee. However, a larger forex reserve does not guarantee a stronger rupee, as the currency remains near a record low against the US dollar.