{"id":115252,"date":"2021-06-28T19:06:06","date_gmt":"2021-06-28T13:36:06","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=115252"},"modified":"2021-07-01T11:54:52","modified_gmt":"2021-07-01T06:24:52","slug":"our-record-forex-reserves-must-be-seen-in-the-right-perspective","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/our-record-forex-reserves-must-be-seen-in-the-right-perspective\/","title":{"rendered":"Our record forex reserves must be seen in the right perspective"},"content":{"rendered":"\n

Synopsis:<\/span><\/b>\u00a0India\u2019s Foreign exchange reserves have registered a record increase. However, analyzing factors and impacts of this increase are important.\u00a0<\/span>\u00a0<\/span><\/p>\n

Introduction\u00a0<\/span><\/b>\u00a0<\/span><\/h5>\n

India\u2019s foreign exchange reserves crossed $600 billion for the first time. On July 11, the reserve stood at $608.1 billion. Out of that foreign currency reserves account for $563.5 billion and gold reserves accounts for $38.1 billion.<\/span>\u00a0<\/span><\/p>\n

Now India has 5<\/span>th<\/span>\u00a0largest foreign exchange reserves in the world.\u00a0Whereas\u00a0Gold reserves 695.3\u00a0tonnes\u00a0are largest.\u00a0<\/span>\u00a0<\/span><\/p>\n

How useful is this increase in foreign exchange reserves?<\/span><\/b>\u00a0<\/span><\/h5>\n

Cover for imports:<\/span><\/b>\u00a0Firstly, if we consider the projected imports for 2021-22, the current level of reserves provides cover for less than 15 months. It is lower than for other major reserve holders\u2014Switzerland (39 months); Japan (22 months); Russia (20 months); and China (16 months).\u00a0<\/span>\u00a0<\/span><\/p>\n

External debt:<\/span><\/b>\u00a0Secondly, as of December 2020, total external debt of India is $563.5 billion. It was 104% of our foreign currency assets of $541.6 billion on 1 January 2021.\u00a0<\/span>\u00a0<\/span><\/p>\n

Net International Investment (NII)<\/span><\/b>: Between December 2019 and 2020, NII position of India has improved. Foreign exchange reserves get counted as assets in counting net international investment position.<\/span>\u00a0<\/span><\/p>\n

NII is the difference between a country\u2019s stock of foreign assets vis-a-vis foreigners\u2019 stock of the country\u2019s asset.\u00a0<\/span>\u00a0<\/span><\/p>\n

Reasons behind an increase in foreign exchange reserves<\/span><\/b>\u00a0<\/span><\/h5>\n

Due to fall in consumer demand for oil and other products, imports of India reduced. Other activities like personal and business foreign travel, foreign education, etc. where foreign exchange is required also came down.<\/span>\u00a0<\/span><\/p>\n

India\u2019s incoming foreign currency pace from exports and remittances also reduced. However, it was still higher than the demand for it.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Foreign Portfolio Investments to India was at all-time high of $37 billion.\u00a0<\/span>\u00a0<\/span><\/p>\n

Suggestions<\/span><\/b>\u00a0<\/span>\u00a0<\/span><\/p>\n

Covid has impacted the private consumption badly. Thus, this increased foreign exchange reserves should be spent to give a stimulus to the economy.<\/span>\u00a0<\/span><\/p>\n

Source: –\u00a0<\/span><\/b>Livemint<\/span><\/b><\/a>\u00a0<\/span><\/b>\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Synopsis:\u00a0India\u2019s Foreign exchange reserves have registered a record increase. However, analyzing factors and impacts of this increase are important.\u00a0\u00a0 Introduction\u00a0\u00a0 India\u2019s foreign exchange reserves crossed $600 billion for the first time. On July 11, the reserve stood at $608.1 billion. Out of that foreign currency reserves account for $563.5 billion and gold reserves accounts for… Continue reading Our record forex reserves must be seen in the right perspective<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1566,3127,9],"tags":[],"class_list":["post-115252","post","type-post","status-publish","format-standard","hentry","category-daily-factly-articles","category-economy","category-public","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":1700785139,"cached_date":1704951099},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/115252","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=115252"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/115252\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=115252"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=115252"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=115252"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}