Mumbai, : India’s foreign exchange reserves surged to a historic high of $687.26 billion, rising by $1.03 billion in the week ending December 12, according to fresh RBI data released Friday. The increase comes at a critical time as the central bank works to stabilize the rupee, which recently slipped to 90.52 per dollar amid tariff shocks from the US and heightened global uncertainty.
The latest boost was powered by a $800 million jump in foreign currency assets, lifting them to $602.5 billion, alongside a $200 million valuation gain in gold reserves. Special Drawing Rights (SDRs) also climbed by $50 million, taking India’s IMF-linked holdings to $18.4 billion.
RBI’s Strategic Defense of the Rupee
RBI Governor Sanjay Malhotra credited the reserve build-up to “prudent and calibrated intervention”, including nearly $2 billion in spot market dollar sales last week. He noted the reserves now provide 11 months of import cover, a major comfort as India grapples with a $600 billion annual trade deficit and rising energy import bills—oil alone costs the country nearly $150 billion per year.
Despite November witnessing $10 billion in FII outflows, Sanjay Malhotra said the reserve position reflects strong fundamentals, supported by $15 billion in annual remittances, robust IT export earnings, and improving services trade surpluses.
Government, Markets React
Finance Minister Nirmala Sitharaman hailed the reserves as a “stability anchor” amid global trade frictions, assuring Parliament that India remains well-shielded against external shocks. Analysts at HSBC project the reserves could touch $700 billion by March 2026, contingent on a rebound in foreign direct investment (FDI).
Opposition leader Rahul Gandhi, however, questioned the sustainability of the reserve build-up, citing persistent foreign investor exits and rising external vulnerabilities.
Global Context and Market Impact
India now stands among the world’s top reserve holders—behind Japan’s $1.3 trillion but well above China’s levels when excluding off-balance-sheet positions. The reserves also help lower borrowing costs for India’s $1.2 trillion external debt, keeping interbank rates steady at 6.5%.
Indian markets responded positively, with the BSE Sensex rising 350 points to 79,000, reflecting investor confidence in India’s macroeconomic buffer.
Strategic Outlook: Diversification, Climate Bonds & Digital Finance
Experts urge the RBI and Finance Ministry to diversify holdings into euros and other currencies to reduce dollar exposure. The strong reserve position is also expected to support:
India’s $10 billion climate bond pipeline,
Protection against Fed-driven volatility,
Strengthening of India’s credit outlook ahead of global rating reviews.
The RBI’s forex committee, chaired by Sanjay Malhotra, meets next week to review reserve adequacy amid the US Federal Reserve’s latest rate signals.
A Post-Pandemic Resilience Story
With global headwinds—from geopolitical tensions to commodity volatility—still shaping markets, India’s record-high reserves underscore its post-pandemic economic resilience and growing role as a stabilizing force in emerging markets.
