India's forex reserves hit life's high of $322.135 billion
24 January 2015
India's foreign exchange reserves hit a lifetime high of $322.135 billion during the week ended 16 January, crossing the $320 -billion mark for the first time after it hit $320.79 billion during the week ended 2 September 2011.
The forex kitty jumped by $2.66 billion to reach $322.135 billion during the week, Reserve Bank data released on Friday showed.
Reports say RBI bought dollars aggressively to boost its forex reserves in order to cushion any impact of a possible forex outflows once the US Federal Reserve starts tightening monetary policy.
RBI's forex reserves rose $2.7 billion during the week ended 16 January to $322.14 billion, up $30 billion (or 10 per cent) year-on-year, RBI data showed.
The stability in the forex reserves has been in part due to RBI's massive dollar purchases from the foreign exchange market over the year.
The reserves are now enough to cover eight weeks' import bill while providing an effective cushion against outflows if and when an interest rate hike by the US Fed triggers a secular outflow of dollars from emerging markets.
RBI closed 2014 as a net buyer of dollars, both in the spot and forward markets, netting a record $75 billion in April-November 2014. An expanded bond market for foreign investors also helped RBI boost its forex reserves.
Foreign institutional investors poured in a record $26.4 billion into Indian bonds and another $16 billion into shares in 2014. Inflows into debt so far during January stood at $2.5 billion while the equity market has seen inflows of around $890 million.
RBI also managed to keep the rupee from wide fluctuations by absorbing over 90 per cent of the debt flows.
Dollar inflows are expected to continue as the government continues to lure foreign investments in more sectors even as it opens up new channels of investment.