The RBI submits the forex reserve reports every week. In the past week, the statistics that it submitted got the economic strategist on a surprise as the forex reserve shoots much higher than expected. The data related by RBI shows that it is on the verge to touch a lifetime high of $575.3 billion after rising by $2.5 billion initially. The IMF reserve position also saw a surge of $19 million.
What foreign reserves comprise of
The foreign reserves mainly comprise foreign currency assets (FCAs), special drawing rights (SDRs), gold reserves, and India’s reserved position with the IMF or international monetary fund. The most surges in the forex reserve come from the FCAs that add to almost $2.835 billion per week. Basically, this is expressed in terms of US dollars but includes the effect of appreciation or depreciation of other non-US units as well, like the pound, euro, etc.
RBI intervention caused this surge
The intervention of RBI into the financial market has also affected this surge voraciously. If steps were not taken to arrest the heavy slide of rupees by the RBI itself, then having such forex reserves statistics would not have been possible. The Gold reserves value might have declined a lot but the other forex reserves have improved a lot to add to this surge that made it to the history of forex reserves by reaching an all-time high of $575.3 billion. Hopefully, this surge shall remain for weeks and help India recover from the economic crisis that it is facing currently. It is yet to be seen how the foreign exchanges are controlled by the Indian government in the time of the ongoing restrictions imposed on most of the foreign exchange items.
Imports also caused this surge
Though the nation is suffering a lockdown period and in the middle of a pandemic, there have been imports of crude oil, gold, and electronics during the period which has made this rise in forex reserves possible. It is evident that the domestic economic market has suffered a lot due to the pandemic but thankfully the international exchanges have not suffered too much even though the entire world was suffering from covid 19 pandemic situations.
The Policy Times suggestion
- It is a good indication that India’s forex reserves are on growth rate as opposed to the economic growth rate which is declining day by day due to the pandemic. The gold reserves and the foreign country assets have added to this surge.
- In times of such economic crises, having a positive growth on the forex reserves is a good sign for India. However, we must not make it for granted as it can decline again. With the rise and fall in gold prices and foreign exchange of pleasantries, this surge has been possible. We must emphasize more on developing our foreign trade.