The forex chest's swell: Valuation gains to lift India's reserves

But when capital flows are volatile, as has happened this financial year, even financing a low CAD can become challenging and put pressure on the currency

India’s foreign exchange reserves, at a sizeable $699.9 billion as of October 3, represent a healthy level, according to adequacy yardsticks such as import cover and external debt servicing requirements.

 

In times of lingering geopolitical uncertainties and market volatility, that fourth-biggest hoard in the world is a bulwark. The country’s current account deficit (CAD) remains comfortable as well, coming in at 0.2 per cent of gross domestic product (GDP) in the first quarter of the financial year.

 

But when capital flows are volatile, as has happened this financial year, even financing a low CAD can become challenging and put pressure