India's gold reserves held by the Reserve Bank of India increased by $1.98 billion on a weekly basis to $114.58 billion as of June 5, according to official data. However, overall forex reserves fell by $711 million to $681.61 billion, primarily due to a $2.70 billion decline in foreign currency assets (FCA) to $543.44 billion. The previous week had seen forex reserves jump by $938 million to $682.321 billion, indicating continued volatility in India's external reserves. The RBI's intervention measures continue to support the Indian rupee, which is currently trading at around 95 level versus the US dollar, significantly lower than the 97 level earlier this year.
India's external sector is demonstrating strong resilience, with macroeconomic policies successfully easing underlying risks, according to Chief Economic Advisor V Anantha Nageswaran. Speaking at the NDTV Ignite summit on Friday, the CEA assured that the Reserve Bank of India will not need to burn through its dollar reserves to manage the rupee's trajectory. As reported by NDTV, Nageswaran declared that "the worst is behind us" on the external front, with the macroeconomic situation appearing much more under control. The latest forex reserve data reflects this improved external position, with the RBI's strategic use of gold reserves helping maintain overall reserve strength.
The macroeconomic situation has been aided by proactive government measures during recent global crises, with crude oil prices behaving better than anticipated. According to the CEA's assessment, a decline in urea prices is providing an additional breather to the domestic economy. The RBI's recent decision to bear the hedging cost of FCNR-B deposits is specifically aimed at shoring up US dollar reserves and aiding the Indian rupee's recovery. These favorable conditions have contributed to the improved external sector outlook and reduced pressure on the rupee, with traders expecting the currency to trade in the 94.70-95.60 level range going forward.
Despite the optimistic assessment, Nageswaran cautioned that India is not immune to global geoeconomic friction. As reported by NDTV, if the ongoing conflict in the Middle East sustains into the second half of the year, or if crude oil prices breach the $100 per barrel mark, India's economic growth could moderate to 6%. However, acknowledging that there are still many "unknowns" in the global landscape, the CEA firmly stood by the Reserve Bank of India's current 6.6% GDP growth estimate. The RBI's strategic use of gold reserves demonstrates its commitment to maintaining financial stability while managing external pressures.
Looking at the long-term horizon, Nageswaran emphasised that India needs to consistently compound its growth at 8% to achieve the 'Viksit Bharat' goal. According to the CEA's statement, he also expressed confidence that the country is positioned to handle the FY27 fiscal year better than expected, adding that nominal GDP expansion will help compensate for any lower tax buoyancy. Even as he noted that government tax reliefs remain somewhat unbalanced, the overall fiscal outlook appears manageable, with the RBI's proactive intervention measures providing additional support for economic stability.
