India’s Forex reserves edge higher on Gold gains, remain among world’s top four

India’s foreign exchange reserves rose modestly by USD 392 million to USD 687.19 billion in the week ended January 9, supported by a sharp increase in gold holdings, even as foreign currency assets declined, data released by the Reserve Bank of India (RBI) showed.

The marginal increase follows a steep decline in the previous week, though overall trends indicate that the country’s forex reserves have largely remained on an upward trajectory in recent months. India’s reserves are currently hovering close to their record high of USD 704.89 billion , achieved in September 2024.

According to the RBI’s Weekly Statistical Supplement, foreign currency assets (FCAs) which form the largest share of the reserves fell by USD 1.12 billion to USD 550.87 billion during the reported week. In contrast, gold reserves rose significantly by USD 1.57 billion to USD 112.83 billion, reflecting the sustained rally in global gold prices.

The rise in gold holdings comes amid heightened global uncertainty, driven by geopolitical tensions, volatile financial markets and shifting monetary policy expectations in major economies. As a traditional safe-haven asset, gold has seen strong demand globally, prompting central banks, including the RBI, to benefit from valuation gains and diversification of reserve portfolios.

Despite short-term fluctuations, India continues to rank among the top four countries globally in terms of foreign exchange reserves, alongside China, Japan and Switzerland. This strong global standing provides India with a substantial buffer against external shocks, capital flow volatility and currency market pressures.

Following its December monetary policy review, the RBI reaffirmed that India’s foreign exchange reserves are adequate to cover more than 11 months of merchandise (imports), underscoring the robustness of the country’s external sector. The central bank has also indicated that it remains well-positioned to meet external financing needs even in an uncertain global environment.

On an annual basis, India’s forex reserves have shown steady improvement. In 2025 so far, reserves have increased by approximately USD 56 billion , following a rise of just over USD 20 billion in 2024. This comes after a strong addition of around USD 58 billion in 2023, reversing the sharp decline of USD 71 billion recorded in 2022 amid aggressive global monetary tightening.

Foreign exchange reserves comprise assets held by a central bank in reserve currencies such as the US dollar, euro, Japanese yen and pound sterling, along with gold. The RBI actively intervenes in the currency market by buying dollars during periods of rupee strength and selling them when the currency weakens, aiming to curb excessive volatility rather than target specific exchange levels.

As global risks persist, India’s sizable and increasingly diversified forex reserves are expected to remain a key pillar of macroeconomic stability.