RAS question
According to RBI data for the week ended April 3, 2026, India's foreign exchange reserves rose mainly because of a sharp increase in which component?
Correct answer: (C) Gold Reserves.
India's foreign exchange reserves rose in the week ended April 3, 2026 mainly because Gold Reserves increased sharply by 7.221 billion dollars to 120.742 billion dollars.
Explanation
RBI's weekly data, reported by Xinhua, showed India's foreign exchange reserves rising by 9.063 billion dollars to 697.121 billion dollars for the week ended April 3, 2026. The main driver was Gold Reserves, which rose by 7.221 billion dollars to 120.742 billion dollars. This increase accounted for most of the overall rise. Foreign Currency Assets also increased, but by a smaller 1.784 billion dollars to 552.856 billion dollars. The main cause depends on comparing the size of component-wise changes, not merely identifying a reserve component. External commercial borrowings do not form part of forex reserves; the reserve components relevant here are Foreign Currency Assets, Gold, SDRs and the Reserve Tranche Position.
Why the other options are wrong
- (A) Special Drawing Rights are a component of forex reserves, but Gold Reserves, not SDRs, recorded the sharp increase that mainly drove the rise.
- (B) The Reserve Tranche Position with the IMF is a forex-reserve component, but it did not drive the 9.063 billion dollar increase.
- (D) External commercial borrowings are not a component of India's foreign exchange reserves, so they cannot explain the component-wise rise in reserves.
Concept
This tests the balance-of-payments and external-sector concept of foreign exchange reserve composition. RAS repeatedly asks this because candidates must distinguish reserve components from broader external-finance terms and read current RBI data component-wise.