Mumbai: India’s foreign exchange reserves recorded a sharp jump in a single week, reinforcing the country’s external sector strength amid a volatile global environment. According to data released by the Reserve Bank of India (RBI) on Friday, total forex reserves rose by USD 14.17 billion to USD 701.36 billion in the week ended January 16, 2026.
Economists said the sharp rise points to renewed stability in India’s external buffers after recent fluctuations driven by currency movements and central bank interventions. The latest increase follows a relatively modest rise of about USD 392 million in the previous week, when reserves stood at USD 687.19 billion, making the current surge notably large.
Crossing the USD 700 billion level once again is significant, not only as a psychological milestone for markets but also as a signal of India’s capacity to manage external shocks, fund imports and maintain currency stability.
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Key Components: Foreign Currency Assets, Gold and SDRs
RBI data showed that foreign currency assets (FCA) — the largest component of the reserves — increased by USD 9.65 billion to USD 560.52 billion during the reporting week. FCA includes holdings in major global currencies such as the US dollar, euro, pound sterling and Japanese yen, with their value fluctuating based on exchange rate movements.
The gold reserves component also registered a strong rise, increasing by USD 4.62 billion to USD 117.45 billion. Gold is widely regarded as a safe-haven asset and often provides stability to a country’s reserves during periods of global uncertainty and financial stress.
However, other components saw marginal declines. Special Drawing Rights (SDRs) fell by USD 35 million to USD 18.70 billion, while India’s reserve position with the International Monetary Fund (IMF) declined by USD 73 million to USD 4.68 billion.
Why the Rise in Reserves Matters
Foreign exchange reserves serve as a critical indicator of a country’s ability to meet external obligations, including import payments and foreign debt servicing. A strong reserve position also provides the central bank with flexibility to intervene in currency markets to manage excessive volatility.
Analysts said the latest surge strengthens India’s capacity to manage rupee fluctuations, cushion against global financial shocks and sustain investor confidence, particularly at a time when capital flows remain sensitive to interest rate movements in advanced economies.
India’s forex reserves had earlier touched an all-time high of USD 704.89 billion in September 2024. Subsequently, reserves came under some pressure as the RBI intervened in currency markets to smooth sharp movements in the rupee. The current rebound suggests a renewed balance on the external front.
Recent Trends and Broader Context
Over the past year, India’s forex reserves have seen periodic ups and downs, reflecting shifts in global financial conditions, trade flows and domestic monetary policy actions. While capital inflows and export earnings supported reserves at certain points, periods of dollar strength and global risk aversion led to drawdowns.
Towards the end of 2025, reserves began showing gradual improvement, supported by gains in foreign currency assets and rising gold valuations. The latest data confirm that reserves have once again climbed decisively above the USD 700 billion threshold.
In December 2025, reserves had increased incrementally over several weeks, driven largely by currency asset gains and higher gold prices, before stabilising amid changing macroeconomic signals.
What Drives Changes in Forex Reserves
Movements in foreign exchange reserves are influenced by several factors:
- Exchange Rate Fluctuations: Since reserves are reported in US dollars, changes in the dollar’s value against other major currencies affect the overall valuation.
- RBI’s Market Operations: The central bank buys or sells foreign currency to manage excessive volatility in the rupee.
- Gold Price Movements: Global changes in gold prices directly impact the value of gold held in reserves.
Impact on Markets and the Economy
A robust forex reserve position is generally viewed as positive for financial markets, as it enhances confidence in macroeconomic stability and supports currency management. However, economists caution that reserve accumulation must be assessed alongside broader indicators such as the current account balance, inflation trends and capital flow dynamics.
Market participants are expected to closely monitor how the sharp increase in reserves aligns with upcoming signals on rupee movement, monetary policy stance and global economic conditions in the weeks ahead.
