India’s Forex Reserves – Trends as on March 14, 2025

1 Apr 2025 , 11:55 AM

India is witnessing a rebuilding of forex reserves. This contrasts with RBI’s reluctance to aggressively prop up the depreciation INR last year. After seeing forex reserves drop by more than USD 70 bn in 2024, RBI is overseeing a sharp buildup in forex reserves now.

In the week ended 14^th March 2025, India’s total forex reserves increased by USD 4.5 bn. This is among the highest increases in reserves YTD. Overall, in March, this brings the total increase to USD 20 bn. Early March had seen the sharpest increase in reserves as RBI had executed a USD 10 bn forex swap.

Figure: Trends in India’s Forex Reserves

Source: RBI

What are the components of India’s Forex Reserves?

The bulk of India’s forex reserves are foreign currency assets. These mostly comprise of treasury bills. They account for 85%. Gold is the second largest component. India holds USD 77 bn of gold reserves.

During the week ended 21^st March, increase in gold reserves contributed to more than 50% of overall increase. This is despite the fact that gold accounts for only 12% of total reserves.

Gold prices have been increasing and explain some of the increase in gold reserves. However, given that the overall increase in gold reserves were much higher, fresh gold purchases were also likely involved.

Figure: Components of India’s Forex Reserves

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Source: RBI

 What is the significance of Forex Reserves?

Forex reserves hold paramount importance to emerging economies. Historically, issues related to exchange rates and forex reserves had severely impacted many Asian economies. A case in point being the Asian Financial Crisis, where countries with insufficient forex reserves fared worse.

Due to such historical reasons and being amongst the most important players in global trade, both Indian and China maintain a significant amount of forex reserves. While China ranks #1 in its forex reserves, India Ranks #4.

Figure: Top 5 countries with highest forex reserves (USD billions)

Source: Central Banks of respective countries