Foreign exchange reserves of India

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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]

India's foreign exchange (Forex) reserveassets (FCA) stand at $376.20 billion, gold reserves at $20.69 billion, SDRs of $ 1.52 billion and $2.30 billion reserves in IMF leasing to total Forex reserves of US$ 400.726 billion as on September 8, 2017, as per Reserve Bank of India's (RBI) weekly statistical supplement.[3][4] The Economic survey of India 2014-15 said India could target foreign exchange reserves of US$750 billion-US$1 trillion.[5]

As at 2017, it's foreign exchange reserves are mainly composed of US dollar in the forms of US government bonds and institutional bonds.[6] Based on data supplied by the Reserve Bank of India on August 18, 2017, Foreign currency assets(FCAs) were US$369.69 billion, while gold reserves were US$19.94 billion.[7] SDRs'(special drawing rights) value stands at $1.49 billion, while country's reserve position with the IMF stands at $2.26 billion. Gold reserves in India constitute nearly 15 percent of forex. India is, coincidentally the world's largest gold consuming nation,[8] the FCAs also include investments in US Treasury bonds, bonds of other selected governments and deposits with foreign central and commercial banks. India is at 8th position in List of countries by foreign-exchange reserves , just below Republic of China (Taiwan) , Russia and South Korea.[9][10]

Composition[edit]

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.[11]

The Foreign exchange reserves of India consists of below four categories;[12]

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

Statistics[edit]

  • In 1980, India had foreign exchange reserves of over U$7 billion, more than double the level (U$2.55 billion) of what China had at that time.[9]
  • India was forced to sell dollars to the extent of close to U$35 billion in the spot markets in Financial Year 2009 due to 22% depreciation in rupee (against the dollar) in the same fiscal year 2009.
  • Foreign exchange reserves of India reached milestone of $100 billion mark only in 2004.
  • In 2009, India purchased 200 tonnes of gold from the International Monetary Fund, worth US$6.7bn (€4.57bn, £4.10bn).[13]

See also[edit]

References[edit]

External links[edit]