India’s forex reserves rose by $23.5 billion in the last one year, according to the Reserve Bank of India’s latest statistical supplement. At first glance, that looks reassuring. But dig deeper: almost all of the increase came from gold revaluation, while foreign currency assets actually fell. In dollar terms, reserves look healthy, but with the dollar index down about 10% in the same period, the question nags: are central banks really gaining, or just treading water in a turbulent pool?This is the dilemma that should be haunting reserve managers today. Once upon a time, dollar reserves were the safest of safe assets. Then came 2022, when the West froze Russia’s $300 billion stockpile, revealing that “rainy-day” savings could be turned into political hostages overnight. Suddenly, central banks realized their fortress was just a rented apartment with a landlord who could change the locks.
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