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Rising Gold Share: India’s gold holdings within its foreign exchange reserves (forex) have almost doubled, increasing from 6.7% in 2019 to 12% by February 2025, according to the World Gold Council (WGC).
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Overall Forex Increase: India’s forex reserves reached USD 677.84 billion in April 2025.
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Gold Reserves Boost: The rise in forex reserves was partly due to a USD 638 million increase in gold reserves, alongside an increase in Foreign Currency Assets (FCA).
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Forex Reserve Definition: Forex reserves are assets held by a central bank in foreign currencies, including currencies, bonds, and securities.
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RBI’s Role: The Reserve Bank of India (RBI) manages India’s forex reserves, as authorized by the RBI Act, 1934.
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Purpose of Reserves: Forex reserves help stabilize the national currency, meet external payment needs, and act as a buffer during financial shocks.
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Components of Forex Reserves: India’s forex reserves consist of Foreign Currency Assets (FCA) (largest component), Gold reserves (second-largest), Special Drawing Rights (SDRs), and Reserve Tranche Position (RTP) with the IMF.
Why This Matters:
- Diversification: Increasing gold holdings diversifies India’s forex reserves, potentially reducing reliance on specific currencies like the US dollar.
- Safe Haven Asset: Gold is often seen as a safe haven asset during economic uncertainty, which can provide stability to the reserves.
- Confidence: Higher forex reserves, including gold, can boost investor confidence in India’s economy and its ability to meet its financial obligations.