Foreign exchange reserves of India

The Foreign exchange reserves of India are India's holdings of cash, bank deposits, bonds, and other financial assets denominated in currencies other than India's national currency, the Indian rupee. The reserves are managed by the Reserve Bank of India for the Indian government and the main component is foreign currency assets.

Foreign exchange reserves act as the first line of defense for India in case of economic slowdown, but acquisition of reserves has its own costs.[1] Foreign exchange reserves facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.[2]

The Economic survey of India 2014-15 said India could target foreign exchange reserves of US$750 billion-US$1 trillion.[3]

As at 2016, it's foreign exchange reserves are mainly composed of US dollar in the forms of US government bonds and institutional bonds.[4] Based on data supplied by the Reserve Bank of India on November 11, 2016, Foreign currency assets(FCAs) were US$343.927 billion, while gold reserves were US$20.46 billion.[5] Gold reserves in India constitute nearly 15 percent of forex. India is, coincidentally the world's largest gold consuming nation.[6] India is at 8th position in List of countries by foreign-exchange reserves , just below Republic of China (Taiwan) , Russia and South Korea.[7][8]

Composition

Reserve Bank of India Act and the Foreign Exchange Management Act, 1999 set the legal provisions for governing the foreign exchange reserves. Reserve Bank of India accumulates foreign currency reserves by purchasing from authorized dealers in open market operations. Foreign exchange reserves of India act as a cushion against rupee volatility once global interest rates start rising.[9]

The Foreign exchange reserves of India consists of below four categories;[10]

  1. Foreign Currency Assets
  2. Gold
  3. Special Drawing Rights (SDRs)
  4. Reserve Tranche Position in the IMF

Statistics

See also

References

  1. ↑ "Costs Involved In Increasing Forex Reserves: RBI".
  2. ↑ "RBI".
  3. ↑ "RBI Monetary Policy $1 trillion forex reserves: A pipe dream".
  4. ↑ Y V Reddy: India’s foreign exchange reserves – policy, status and issues – May 10, 2002
  5. ↑ "Weekly Report RBI".
  6. ↑ "India's forex reserves lose shine as gold prices plummet".
  7. 1 2 "Surging forex reserves to help improve economic outlook".
  8. ↑ "Look How Rich India's Become Under New Prime Minister Modi".
  9. ↑ "India’s forex reserves will cushion Rupee volatility: Rajan".
  10. ↑ "Foreign exchange reserves of india".
  11. ↑ "India flexes its foreign reserve muscles".
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