The Indian Government’s focus on bringing down imports and increasing exports, intending to bolster the domestic manufacturing has helped India become the 4th largest forex holder in the world, surpassing Russia. According to the RBI, foreign exchange reserves of the country declined by $4.255 billion to $580.299 billion in the week ended March 5 from $584.554 billion on February 26. India's forex reserves had touched a record high of $590.185 billion in the week ended January 29, 2021.
India is now behind China, which has the largest forex holding followed by Japan and Switzerland. India surpassed Russia after Russia's forex holdings declined at a faster rate in the recent weeks than India. According to the latest data published by International Monetary Fund (IMF), As of March 14, Russia's Forex holdings fell to $580.1 billion, down $9.5 billion from the previous week.
India's foreign-exchange reserves are now sufficient to cover around 18 months of imports. Continous inflows by foreign portfolio investors (FPIs) into the Indian stock market, rising foreign direct investment (FDI) have boosted India's current-account surplus over the last year.
Rising forex reserves hold significance for India as it will give comfort to international credit rating agencies and foreign investors that India can meet its debt obligations despite a declining fiscal outlook.
Worth mentioning here is that RBI has bought a net of $88 billion in the spot forex market in 2020. India's rupee is now on the US Treasury watch list for currency manipulation.
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