Good news: Amid global tensions and trade deal negotiations with the US, this news of relief comes.:The most positive aspect of the week was the sharp increase in gold reserves. According to the RBI, gold reserves increased by $1.568 billion to reach $112.83 billion.

News Topical, Digital Desk : India's Forex Reserve: This news comes amid global tensions and long-running trade deal negotiations with the US. The Reserve Bank of India (RBI) reported on Friday that India's foreign exchange reserves increased by $392 million to $687.19 billion in the week ended January 9. The country's total foreign exchange reserves had declined by $9.809 billion to $686.80 billion in the previous reporting week.

Decline in foreign currency assets

According to RBI data, Foreign Currency Assets (FCA), the largest component of the foreign exchange reserves, declined by $1.124 billion to $550.866 billion during this period.

Foreign currency assets expressed in dollar terms also include the effect of fluctuations in the value of non-US currencies such as the euro, pound and yen.

Strong jump in gold reserves

The most positive aspect of the week was a sharp increase in gold reserves. According to the RBI, gold reserves increased by $1.568 billion to reach $112.83 billion. Special Drawing Rights (SDRs) declined by $39 million to $18.739 billion.

Meanwhile, India's reserve position with the International Monetary Fund (IMF) declined by $13 million to $4.758 billion. Although foreign currency assets declined, a strong increase in gold reserves led to an increase in total foreign exchange reserves. Amid global volatility, India's strong foreign exchange reserves reflect the country's economic stability and ability to withstand external shocks.

Why are foreign exchange reserves necessary?

Foreign exchange reserves are the backbone of any country's economy. They not only reflect a country's financial strength but also play a crucial role in stabilizing the economy during times of crisis.

1. Help with imports and foreign payments

The country imports crude oil, machinery, electronics, and other essential goods. Foreign exchange reserves are used to pay for these imports. Furthermore, these reserves are used to pay for interest and principal on foreign loans.

2. Role in stabilizing the rupee

In India, the Reserve Bank of India (RBI) uses foreign exchange reserves to stabilize the rupee. When the rupee comes under pressure or falls sharply, the RBI tries to stabilize the rupee by selling dollars in the market.

3. Protective shield from global crisis:
In situations like global recession, war, surge in oil prices or sudden outflow of capital, foreign exchange reserves act as a protective shield for the country and protect the economy from shocks.

4. Foreign Investor Confidence:
Strong foreign exchange reserves increase foreign investor confidence in the country. This encourages foreign direct investment (FDI) and foreign direct investment (FPI) investments, increasing investment in various sectors of the country.

5. International Credit and Rating:
Having higher foreign exchange reserves improves the credit rating of the country and strengthens its economic credibility on international forums.