The Reserve Bank of India (RBI) emerged as a net buyer of dollars during the first half of the current financial year (April-September 2024), purchasing $8.52 billion in the spot market. This marks a significant moderation compared to the $17.68 billion net purchase in the same period last year.
In September 2024 alone, the central bank recorded a net purchase of $9.6 billion, the highest for the financial year, reversing its net sales of $6.49 billion in August. Overall, the RBI bought $28.9 billion and sold $19.2 billion in foreign exchange during the first half. The local currency appreciated marginally by 0.07% during September.
For the calendar year to September 2024, the RBI’s net dollar purchases stood at $32.27 billion, reflecting its efforts to manage exchange rate volatility and support India’s external position.
Forex reserves and forward sales
India’s foreign exchange reserves peaked at an all-time high of $705.8 billion at the end of September before declining to $675.7 billion as of November 8. Despite the dip, the reserves remain sufficient to cover more than 11 months of imports and nearly 99% of the external debt as of June-end 2024.
The RBI’s net outstanding forward sales of dollars also decreased to $14.58 billion in September from $18.98 billion in August, signaling reduced intervention in the forward market.
India’s reserves have risen by $53.2 billion in 2024 to date (November 8), the second-largest increase among Asian economies. However, the pace of forex accumulation has slowed compared to the previous financial year, when the RBI recorded net purchases of $41.27 billion.
The central bank’s actions reflect a balanced approach to managing forex reserves, addressing currency volatility, and maintaining a healthy buffer for external obligations. As global economic uncertainties persist, the RBI’s strategy underscores its role in ensuring India’s financial stability.>
