India has enough foreign exchange reserves to meet its anticipated imports for 11 months

The Monthly Economic Review report from the Department of Economic Affairs under the Ministry of Finance states that 11 months’ worth of anticipated imports may be covered by India’s record-high foreign currency reserves.
Furthermore, more than 100% of the entire amount of external debt may be covered by the present foreign currency reserves. Notably, the just ended fiscal year 2023–24 witnessed a notable reversal in capital inflows into India.

In the week that concluded on April 12, India’s foreign currency reserves increased for the seventh consecutive week, reaching a record high of USD 648.562 billion. Overall, foreign currency reserves will have increased by almost USD 23 billion in 2024.

Currency reserves, often known as foreign exchange reserves, or FX reserves, are assets owned by the central bank or monetary authority of a country. The US dollar is often used as a reserve currency, with smaller amounts maintained in the Euro, Japanese yen, and pound sterling.
October 2021 was the last time the nation’s foreign currency reserves reached an all-time high. A significant portion of the subsequent decrease may be attributed to an increase in the price of imported products in 2022.

Additionally, the RBI’s sporadic market interventions to support the rupee’s uneven depreciation versus the US dollar’s surge might be connected to the relative decline in foreign exchange reserves. Usually, to keep the rupee from depreciating sharply, the RBI periodically manages market liquidity by selling dollars, among other activities.
The Reserve Bank of India (RBI) keeps a careful eye on the foreign currency markets and only steps in to keep things in order by limiting excessive market volatility and without using any pre-established target level or range.

According to the Monthly Economic Review report, in 2023–24, the rupee-USD exchange rate was one of the least volatile major currencies among its peers in emerging markets and a few advanced nations, trading between Rs 82–83.5 per USD.
In comparison to the preceding three years, 2023–24 had the rupee’s least volatility.
“The relative stability of the rupee, despite a stronger US dollar and elevated US Treasury yields, reflects the strength of the Indian economy’s sound macroeconomic fundamentals, financial stability, and improvements in external position,” the research said.
It also said that strong inflows of foreign currency and moderate trade deficits are anticipated to maintain the rupee in a stable range going forward.