With rising inflation and an impending recession threatening to bog down prices of all major international currencies against gold, Reserve Bank of India has been racing ahead to become the biggest buyer of the yellow metal. The central bank is using gold as an age old hedge against economic uncertainty, synonymous with India’s tradition of investment in assets. With the precious metal’s share going up by $354 million, the RBI’s Forex reserves have gone up by $44 million to hit $562.85 billion.
For the week that ended on December 30, 2022, the amount of foreign currency in RBI’s reserves was down by $302 million, as the rupee gained 0.2 per cent against the dollar. The forex reserves at the moment are still lower than $631.53 billion, where they stood in February when Russia attacked Ukraine.
Foreign exchange reserves act as a cushion to absord the shocks which may affect the Rupee’s value against other major currencies. Consumption may be inversely proportionate to forex reserves and are bound to fall with the recent spike, but investment might increase to boost economic growth.