The forex reserves of India crossed the $600-billion mark for the first time on the back of continued foreign investment flow into the capital markets.
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India is now less than $200 million behind Russia, which has an almost identical level of reserves.
The pile-up of foreign exchange reserves is an outcome of the RBI’s strategy of buying dollars when there is a sudden spurt of inflows, which causes volatility in the forex markets.
In FY20, the RBI added over $100 billion to the reserves. It has also sold dollars when the rupee came under pressure. In February and March, the central bank had depleted its stockpile by almost $10 billion by selling dollars.
China has the highest Forex reserves with $3,399.9 billion of U.S. dollars. At that time India’s rank is 8th after Japan, Switzerland, Russia, Saudi Arabia, Taiwan and Hong Kong.
