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India forex reserves current

India forex reserves currentShould India hold $400 billion of forex reserves? If instead of maintaining large forex reserves, the funds are used to finance, say, infrastructure projects, the returns will be much higher. Foreign exchange (forex) reserves with the Reserve Bank of India (RBI) have now crossed the $400-billion mark. This is being celebrated by many people. This column takes a different view. Suppose a country uses fixed exchange rates. If the demand for foreign exchange is high and the exchange rate cannot be increased to induce a reduction in demand, then the central bank needs to have adequate reserves so that it can supply foreign exchange and meet the excess demand. In contrast, under a flexible exchange rate regime, the price of foreign exchange can adjust to bring about a balance between demand and supply. In this context, foreign exchange reserves are not required under a flexible exchange rate regime. It is true that under a flexible exchange rate regime, flexibility can give way to considerable volatility in the foreign exchange market. In this case, it helps to have foreign exchange reserves with the central bank. However, this need arises a lot more if the central bank has multiple objectives than in the case where the central bank has adopted inflation targeting. 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 1990s; 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 1990-91). Furthermore, it formally adopted inflation targeting in June 2016 (previously the RBI followed multiple indicator approach, which arguably played a role in the events culminating in near-crisis in the currency market in 2013). 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 2004-05, but it was criticized. The criticism was not always valid. For example, the critique by Arvind Panagariya (now at Columbia University), in his 2008 book, India: 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 7.5% of GDP (which is extremely high), then there is a need of about $85 billion of foreign exchange reserves. The actual reserves are $400 billion. At the end of March, foreign exchange reserves were equal to 78.4% of India’s total external debt. This is a very large proportion. This is particularly true when short-term debt is only 23.8% of the total debt. There are some difficulties with the concepts used but the essential story that foreign exchange reserves are large relative to the flows of hot money (including the portion of equity investments, which is hot money) remains unchanged—more so if other policies are also adopted. The ministry of finance (MoF) can, according to Anton Korinek at Johns Hopkins University in a series of papers, impose a tax on capital inflows or outflows, if these are sudden and large.

Such a tax can discourage large capital flows; the rupee will then neither appreciate nor depreciate too much. If instead of maintaining large forex reserves, the funds are used to finance, say, useful infrastructure projects, the returns will be much higher. So, the opportunity cost of foreign exchange reserves is very high. In contrast, if the tax policy is used, the revenues will rise for the MoF (and the costs of large forex reserves are not incurred by the RBI). So, the proposed tax policy is superior to the policy of using forex reserves to stabilize the rupee. There is yet another safeguard available. India can buy an inexpensive credit line from the International Monetary Fund or elsewhere. Such a credit line is an option that gives India the right (but not obligation) to borrow if a crisis situation were to arise in future. This instrument, as this author has shown in several papers, reduces the need for large foreign exchange reserves. India already has a credit line to the tune of $50 billion. Additional credit lines can be bought. So, forex reserves can be much less. It is true that China’s reserves are much larger than those of India but that is a different story. The yuan had remained undervalued for long, which pushed exports.

The large reserves are then a cumulative effect of that policy. However, that story is over and not really replicable now. Also, though China’s reserves were $3.84 trillion in 2014, they have now come down to $3.1 trillion. It appears that they will come down further. Also, $800 billion out of the foreign exchange reserves is China’s sovereign wealth fund. If the RBI must have large foreign assets (though there is really no need), then it can be divided into two parts. One part can be the standard foreign exchange reserves which are liquid and give a low return (1% or less). The other part can be a sovereign wealth fund, which is relatively illiquid and gives a high return. Gurbachan Singh is visiting faculty at the Indian Statistical Institute (Delhi Centre) and Ashoka University. Published with permission from Ideas For India, an economics and policy portal. India's forex reserves may fall below $400 billion mark. With the rupee coming under severe pressure due to meltdown in the Turkish lira, India's foreign exchange reserves has come within striking distance of falling below the $400 billion mark. Reserve Bank of India data showed that reserves fell $1.8 billion in the week to August 10 to $400.88 billion. Foreign exchange dealers said that RBI was seen selling dollars to prevent the local currency from falling freely. The country's trade deficit hit a 5-year high of $18.02 billion in July, putting added pressure on the local currency. It has fallen about $26 billion from the record high level of $426.082 billion seen on April 13. RBI sold $14.4 billion in first quarter of the year as against a cumulative purchase of $8.8 billion in the corresponding quarter last year, Care Ratings said in a research note.

Foreign investment flows, however, turned positive after being negative in the first three months of the year. The debt and equity markets saw $941 million inflows in August so far, Care Ratings said. Forex reserves drop by USD 33.2 mn to USD 400.84 bn. India’s foreign exchange reserves fell by USD 33.2 million to USD 400.847 billion in the week to August 17 mainly due to fall in foreign currency assets, according to RBI data. In the previous week, the forex reserves had witnessed a drop of USD 1.822 billion to USD 400.881 billion. The reserves have been declining in the past few weeks as the Reserve Bank is selling the US dollar to contain depreciation in the rupee, which is frequently testing the 70-level against the American unit. The rupee opened today at 70.24 a dollar and closed at 69.91. The Indian unit had hit an intra-day low of USD 70.40 on April 14, 2018. In the week ended August 17, foreign currency assets, a major component of the overall reserves, dipped by USD 60.2 million to USD 376.205 billion, as per data. Expressed in the US dollar terms, foreign currency assets include the effect of appreciationdepreciation of the non-US currencies such as the euro, pound and the yen held in the reserves. Gold reserves rose by USD 36.1 million to USD 20.727 billion in the reporting week. The special drawing rights with International Monetary Fund (IMF) dipped by USD 3.4 million to USD 1.463 billion.

The country’s reserve position with the IMF also declined by USD 5.7 million to USD 2.452 billion, the apex bank said. India's forex reserves slip by $33 mn. Mumbai, Aug 24 (IANS) India's foreign exchange (Forex) reserves slipped by $33.2 million during the week ended August 17, official data showed on Friday. According to the Reserve Bank of India (RBI) weekly statistical supplement, the overall forex reserves inched down to $400.85 billion from $400.88 billion reported for the week ended August 10. India's forex reserves comprise foreign currency assets (FCAs), gold reserves, special drawing rights (SDRs) and the RBI's position with the International Monetary Fund (IMF). Segment-wise, FCAs -- the largest component of the Forex reserves -- receded by $60.2 million to $376.21 billion during the week under review. Besides the US dollar, FCAs consist of nearly 20-30 per cent of major global currencies. However, the value of the country's gold reserves increased by $36.1 million to $20.73 billion. As per the data, the SDRs' value slipped by $3.4 million to $1.46 billion, while the country's reserve position with the IMF inched down by $5.7 million to $2.45 billion. India's forex reserves slip by $ 33 million. Mumbai: India's foreign exchange (Forex) reserves slipped by $33.2 million during the week ended August 17, official data showed on Friday. According to the Reserve Bank of India (RBI) weekly statistical supplement, the overall forex reserves inched down to $400.85 billion from $400.88 billion reported for the week ended August 10. India's forex reserves comprise foreign currency assets (FCAs), gold reserves, special drawing rights (SDRs) and the RBI's position with the International Monetary Fund (IMF). Segment-wise, FCAs -- the largest component of the Forex reserves -- receded by $60.2 million to $376.21 billion during the week under review. Besides the US dollar, FCAs consist of nearly 20-30 per cent of major global currencies. However, the value of the country's gold reserves increased by $36.1 million to $20.73 billion. As per the data, the SDRs' value slipped by $3.4 million to $1.46 billion, while the country's reserve position with the IMF inched down by $5.7 million to $2.45 billion. Forex reserves drop by USD 33.2 mn to USD 400.84 bn. India’s foreign exchange reserves fell by USD 33.2 million to USD 400.847 billion in the week to August 17 mainly due to fall in foreign currency assets, according to RBI data. In the previous week, the forex reserves had witnessed a drop of USD 1.822 billion to USD 400.881 billion.

The reserves have been declining in the past few weeks as the Reserve Bank is selling the US dollar to contain depreciation in the rupee, which is frequently testing the 70-level against the American unit. The rupee opened today at 70.24 a dollar and closed at 69.91. The Indian unit had hit an intra-day low of USD 70.40 on April 14, 2018. In the week ended August 17, foreign currency assets, a major component of the overall reserves, dipped by USD 60.2 million to USD 376.205 billion, as per data. Expressed in the US dollar terms, foreign currency assets include the effect of appreciationdepreciation of the non-US currencies such as the euro, pound and the yen held in the reserves. Gold reserves rose by USD 36.1 million to USD 20.727 billion in the reporting week. The special drawing rights with International Monetary Fund (IMF) dipped by USD 3.4 million to USD 1.463 billion. The country’s reserve position with the IMF also declined by USD 5.7 million to USD 2.452 billion, the apex bank said. India Forex Reserves. 'India Forex Reserves' - 25 News Result(s) Business | Indo-Asian News Service | Friday October 20, 2017. Forex reserves kitty increases by $1.50 billion as on October 13, 2017, official data shows. Business | NDTV Profit Team | Sunday September 17, 2017.

The surge in India's forex reserves is likely to help rupee withstand any volatility that may be seen on exodus of foreign funds from India's debt and equity markets, analysts say. Business | Press Trust of India | Saturday September 16, 2017. The foreign currency assets (FCAs), a major component of the overall reserves, increased by $2.568 billion to $376.209 billion for the reporting week, according to data by the Reserve Bank of India (RBI). Business | Indo-Asian News Service | Saturday September 9, 2017. foreign currency assets (FCAs), a major portion of the overall reserves, increased by $2.808 billion, to $373.641 billion for the week ended September 1. Business | Press Trust of India | Friday June 30, 2017. Expressed in US dollar terms, FCAs include the effects of appreciationdepreciation of non-US currencies, such as the euro, pound and the yen, held in the reserves. Business | Press Trust of India | Saturday October 22, 2016. India's foreign exchange reserves declined by $1.506 billion to $366.139 billion in the week to October 14, due to fall in foreign currency assets, the Reserve Bank said. Business | Press Trust of India | Saturday May 28, 2016. Foreign currency assets, a major component of the forex reserves, dipped by $107.1 million to $336.94 billion for the week ended May 20, the Reserve Bank said in data released. Business | Press Trust of India | Saturday November 21, 2015. Country's foreign exchange reserves increased by $780.9 million to $352.515 billion in the week to November 13, helped by rise in foreign currency assets, according to RBI data. Business | Press Trust of India | Friday July 31, 2015.

Foreign currency assets (FCAs), which are a major component of overall reserves, rose by $314.2 million to $329.245 billion in the week, the data showed. Business | Press Trust of India | Friday July 10, 2015. In May last year too, RBI was a net purchaser of the US currency after it bought $7.98 billion while it sold $6.19 billion from the spot market. Business | Press Trust of India | Friday July 10, 2015. Foreign currency assets (FCAs), which is a major component of overall reserves, dipped by $410.1 million to $330.090 billion, the data showed. Business | Thomson Reuters | Friday May 22, 2015. Rajan also said that the World Bank and Asian Development bank should be ready to bring in long-term risk capital for infrastructure projects in emerging markets. Business | Friday May 1, 2015. Foreign currency assets, expressed in dollar terms, include the effect of appreciation and depreciation of non-US currencies such as the euro, pound and the yen, held in the reserves. Business | Thomson Reuters | Friday March 20, 2015. Reserve Bank of India Governor Raghuram Rajan has long warned of the risk to emerging economies when the US Federal Reserve makes the first rise in its zero per cent interest rates since the 2008 financial crisis. Business | Friday February 27, 2015. Reflecting the stagnant prices of the yellow metal, the country's gold reserves continued to remain unchanged at $20.183 billion for the reporting week. India's forex reserves may fall below $400 billion mark. With the rupee coming under severe pressure due to meltdown in the Turkish lira, India's foreign exchange reserves has come within striking distance of falling below the $400 billion mark.

Reserve Bank of India data showed that reserves fell $1.8 billion in the week to August 10 to $400.88 billion. Foreign exchange dealers said that RBI was seen selling dollars to prevent the local currency from falling freely. The country's trade deficit hit a 5-year high of $18.02 billion in July, putting added pressure on the local currency. It has fallen about $26 billion from the record high level of $426.082 billion seen on April 13. RBI sold $14.4 billion in first quarter of the year as against a cumulative purchase of $8.8 billion in the corresponding quarter last year, Care Ratings said in a research note. Foreign investment flows, however, turned positive after being negative in the first three months of the year. The debt and equity markets saw $941 million inflows in August so far, Care Ratings said. India’s Forex reserves cross $400 billion for the first time on asset surge. On Friday, the Reserve Bank of India said foreign currency assets were $376.20 billion, gold reserves at $20.69 billion, SDRs of $ 1.52 billion and $2.30 billion reserves in IMF. India’s foreign exchange reserves topped the $400 billion mark for the first time to hit an all-time high of $400.726 billion on September 8, aided by a sharp rise in foreign currency assets, mainly huge inflows through foreign direct investments in projects and portfolio investment. After hitting the $300 billion mark in 2008, it took the country over nine years to cross the $400 billion level. Foreign exchange reserves had earlier topped $300-billion in March 2008, months before the global financial crisis hit Indian rupee and the economy. In August 2013, the rupee plummeted to an all-time low of 68.85 against the dollar following the US Federal Reserve’s decision to roll back its stimulus programme. Raghuram Rajan, who was RBI Governor then, announced a series of measures to shore up the rupee and foreign exchange reserves, leading to a gradual strengthening of the rupee and steady build-up of forex reserves. India is now in the sixth position in forex reserves ranking, ahead of Taiwan, Brazil and euro zone.

But China is way ahead topping the table with reserves of $3,053 billion. Japan is in the second position with reserves of $1,188 billion, followed by Switzerland with $743 billion. On Friday, the Reserve Bank of India said foreign currency assets were $376.20 billion, gold reserves at $20.69 billion, SDRs of $ 1.52 billion and $2.30 billion reserves in IMF. However, the huge reserves have not given adequate returns to the country. The RBI’s return from foreign currency assets is now only 0.80 per — the lowest in the last 15 years — compared with 1.29 per cent in 2015-16. Its foreign currency assets are invested in various securities, other central banks and commercial banks abroad during the year ended June 2017. The big rise in forex reserves is to due to inflows through foreign direct investment and portfolio investment in the capital market. Foreign investors pumped in Rs 42,659 crore (around $ 6.7 billion) in stocks and Rs 131,565 crore ($20.55 billion) in debt instruments in calendar 2017. However, market analysts are expecting a slowdown in FPI inflows. While the market witnessed outflows from the stock market in August and September, FPIs are close to reaching their debt investment limit. The rise in inflows was the major reason for the appreciation of the rupee — which closed at 64.08 against dollar on Friday. Analysts have cautioned about Q2, saying that inflows would taper off and that CAD would widen further.

“Going ahead, the second quarter will be challenging as the trade deficit has been widening till August. With crude prices up, pressure will continue to mount on import bill. We need to have software and remittance receipts to increase which are contingent on the state of world economy and US policy to immigration and outsourcing. This needs to be watched carefully. Support from FPIs would be less strong as the flow to debt segment will slow down given that the limits are being reached,” said Madan Sabnavis, chief economist, Care Ratings. India's forex reserves slip by $33 mn. Mumbai, Aug 24 (IANS) India's foreign exchange (Forex) reserves slipped by $33.2 million during the week ended August 17, official data showed on Friday. According to the Reserve Bank of India (RBI) weekly statistical supplement, the overall forex reserves inched down to $400.85 billion from $400.88 billion reported for the week ended August 10. India's forex reserves comprise foreign currency assets (FCAs), gold reserves, special drawing rights (SDRs) and the RBI's position with the International Monetary Fund (IMF). Segment-wise, FCAs -- the largest component of the Forex reserves -- receded by $60.2 million to $376.21 billion during the week under review. Besides the US dollar, FCAs consist of nearly 20-30 per cent of major global currencies. However, the value of the country's gold reserves increased by $36.1 million to $20.73 billion. As per the data, the SDRs' value slipped by $3.4 million to $1.46 billion, while the country's reserve position with the IMF inched down by $5.7 million to $2.45 billion.



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