India’s Foreign Reserves Breached $600 Billion

Posted on 08/14/2021

India’s foreign exchange reserves increased by US$ 889 million to a record of US$ 621.464 billion in the week ended August 6, 2021, according to data from the Reserve Bank of India (RBI). In the previous week ended July 30, 2021, the reserves had surged by US$ 9.427 billion to reach US$ 620.576 billion. Foreign currency assets are a key component of the overall reserves. In August 2020, foreign reserves in India were at US$ 538.19 billion. However, gold reserves were down by US$ 588 million to US$ 37.057 billion in the reporting week, the data showed.

The inflows of U.S. dollar reserves in India has prompted political talks of using that capital for the development of long-term infrastructure in India.

The reasons for India’s growth of foreign reserves is that its trade deficit has come down and foreign direct investment (FDI) has gone up. The lower trade deficit figures means a lower current account deficit for India. FDI in India is a major monetary source for economic development in India. Economic liberalization started in India in wake of the 1991 economic crisis and since then FDI has steadily increased in India, especially with the election of Prime Minister Narendra Modi who brought in major reforms to lure foreign capital from investors such as Asian sovereign wealth funds, foreign corporates, Canadian pension funds, and others.

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