India’s Forex reserve
- India’s foreign exchange reserves crossed the $600 billion mark for the first time after rising by $6.842 billion.
- Forex reserves rose to a record $605.008 billion in the reporting week, helped by a rise in Foreign Currency Assets (FCA), a major component of the overall reserves.
- Foreign-exchange reserves (also called forex reserves or FX reserves) are reserve assets held by a central bank in foreign currencies.
- They are used to back liabilities on their own issued currency, support the exchange rate and set monetary policy.
Importance of these reserves
- All international transactions are settled in US dollars and, therefore, required to support India’s imports.
- More importantly, they need to maintain support and confidence in the central bank's action.
- It also helps to limit any vulnerability due to sudden disturbances in foreign capital flows, which may arise during a crisis.
India’s foreign exchange reserves comprise
- Foreign currency assets (FCAs): These are maintained in currencies like US dollar, euro, pound sterling, Australian dollar and Japanese yen.
- Gold
- SDR (special drawing rights) in IMF: This is the reserve CURRENCY with IMF
- RTP (reserve tranche position) in IMF: This is the reserve CAPITAL with IMF
Countries with the highest foreign reserves according to IMF (2021)
- China – $3,330 Billion
- Japan – $1,378 Billion
- Switzerland – $1,070 Billion
- Russia – $605.200 Billion
- India – $605.008 Billion"