India joined the ranks of the world’s largest foreign exchange reserves, securing the 4th position globally after China, Japan, and Switzerland.

As per the Reserve Bank of India data, India’s foreign exchange reserves increased by USD 12.588 billion in a week to reach an all-time high of USD 704.885 billion in the week ending September 27. However, the forex figures slumped from the peak in the last month.

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It is likely that the recent drop in reserves is due to RBI intervention to arrest a sharp depreciation in the rupee. The high buffer of foreign exchange reserves helps insulate domestic economic activity from global shocks. As per estimates, India’s foreign exchange reserves are now sufficient to cover about or over a year of projected imports.

India’s economy is making new records every day. There was a time when India’s economy was considered a part of the ‘Fragile Five’. However, India’s rise from the “Fragile Five” to the fastest-growing major economy is an example for other developing countries.

The RBI monitors the foreign exchange markets closely and intervenes only to maintain orderly market conditions, aiming to contain excessive volatility in the exchange rate without reference to any pre-determined target level or band.It frequently intervenes in the market through liquidity management, including the sale of dollars, to prevent a steep depreciation of the rupee.