MUMBAI: India’s foreign exchange reserves rose for a second consecutive week, supported by an increase in foreign currency assets, as the Reserve Bank of India’s measures to attract overseas deposits began providing an additional buffer against the external-sector pressures created by the West Asia conflict.
The country’s reserves increased by $964 million to $675.157 billion in the week ended July 10, RBI data released on Friday showed. This followed a much sharper $7.26-billion increase in the preceding week, taking the cumulative addition over two weeks to $8.22 billion.
The recovery, however, remains partial. India’s reserve stock is still $53.34 billion, or 7.3 per cent, below the record $728.494 billion reached in the week ended February 27.
The subsequent erosion came as the West Asia conflict pushed crude oil prices higher, weakened risk appetite towards emerging markets and placed the rupee under sustained pressure. The RBI intervened repeatedly through dollar sales to contain volatile currency movements.
According to a PTI report citing experts, the latest rise, therefore, strengthens India’s import and external-debt cover, but does not by itself signal that the pressure on the rupee or the RBI’s balance sheet has ended.
For the week ended July 10, foreign currency assets, a major component of the reserves, increased by USD 930 million to USD 546.508 billion, the central bank’s data showed. They accounted for more than 96 per cent of the overall weekly rise.
Expressed in dollar terms, the foreign currency assets include the valuation effect arising from movements in currencies such as the euro, pound sterling and Japanese yen. The weekly increase cannot, therefore, be treated entirely as evidence of fresh dollar purchases or capital inflows.
Gold reserves registered a relatively marginal increase of $18 million to $105.223 billion. The composition was markedly different from the previous week, when foreign currency assets rose by $4.51 billion and the value of gold holdings increased by $2.67 billion.
Special Drawing Rights with the International Monetary Fund rose by $3 million to $18.626 billion, while India’s reserve position with the IMF increased by $13 million to $4.800 billion.
India’s reserve position with the IMF was also up by USD 7 million to USD 4.793 billion at the end of the reporting week, according to the apex bank’s data.
Source: The Financial Express
