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Should India hold $400 billion of forex reserves?

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Weekly Statistical Supplement WSS - Extract. 21 Sep ; Foreign Exchange Reserves: 8 kb: kb: 14 Sep ; Foreign Exchange Reserves. India's total foreign exchange (Forex) reserves stand at US$ billion with foreign exchange assets (FCA) component at US$ billion, gold reserves at US$ billion, SDRs (Special Drawing Rights with the IMF) of US$ billion and US$ billion reserve position in IMF in the week to July 20, , as per Reserve Bank of India's (RBI) weekly statistical supplement published .

Central bank steps up dollar sales

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In the latter case, there is less uncertainty for currency markets. The price mechanism works better there and the need for stabilization with forex reserves is less. The RBI has been using flexible exchange rates since the early s; prior to that it followed a fixed exchange rate regime which is, in fact, an important reason why there was a balance of payments crisis in Furthermore, it formally adopted inflation targeting in June previously the RBI followed multiple indicator approach, which arguably played a role in the events culminating in near-crisis in the currency market in Given the two important changes in policy regimes, there is no compelling need for the RBI to maintain very large reserves now.

This is incidentally true not just of India but most other emerging economies that are similarly placed.

The proposal here to cut down foreign exchange reserves had been put forward earlier by the erstwhile Planning Commission in , but it was criticized.

The criticism was not always valid. The Emerging Giant , was actually about the short-run adjustment process involved in shifting from foreign exchange reserves to investments in infrastructure projects rather than about the issue of optimal level of reserves in the long run. These arguments, missed the woods for the trees. It is worth revisiting the proposal. Often there is a tendency to keep forex reserves equal to the value of six months of imports.

However, foreign exchange reserves, as Kaushik Basu Cornell University emphasized, are required to finance only the current account deficits, and not imports as a whole. By this yardstick, the foreign exchange reserves with the RBI are huge. If we take current account deficit at 7. At the end of March, foreign exchange reserves were equal to Click here to contact us. In India, Foreign Exchange Reserves are the foreign assets held or controlled by the country central bank. The reserves are made of gold or a specific currency.

They can also be special drawing rights and marketable securities denominated in foreign currencies like treasury bills, government bonds, corporate bonds and equities and foreign currency loans. This page provides the latest reported value for - India Foreign Exchange Reserves - plus previous releases, historical high and low, short-term forecast and long-term prediction, economic calendar, survey consensus and news.

India Foreign Exchange Reserves - actual data, historical chart and calendar of releases - was last updated on October of India July Wholesale Inflation Slows to 5. India Consumer Inflation Below Forecasts. India Wholesale Inflation at Month High of 4.

India Inflation Rate Rises to 4. India Hikes Key Repo Rate to 6. India Wholesale Inflation at 4-Month High of 3. We also use cookies to administer our sites and for research purposes, zeenews. These third-party service providers use persistent Cookies to help us improve user experience, manage our site content, and analyse how users navigate and utilize the sites.

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