The country’s foreign exchange reserves increased by $ 3.074 billion to a record level of $ 608.081 billion. With this, India has overtaken Russia to reach the fourth position among foreign exchange holding countries. Record investments in the stock market by foreign direct investment (FDI) and private investors have led to a surge in foreign exchange reserves. Economists say that this is news of relief for the sluggish Indian economy. Let us know the meaning of increasing currency reserves.
Five big advantages of forex reserves
1. Increase in foreign exchange reserves is a sign of strength in the economy of a country. In 1991, the country had to mortgage 47 tonnes of gold with England to raise only $ 400 million. But at the current level, India has enough reserves to cover imports for more than a year. That is, it can bear the burden of import expenses of more than one year.
2. Large foreign exchange holding country attracts foreign trade and earns the trust of trading partners. This may encourage global investors to invest more in the country.
3. The government may also decide to urgently purchase essential military goods as there is sufficient foreign exchange available for payment. With this, crude oil does not increase in the import of other essential goods.
4. Foreign exchange reserves can play an effective role in reducing volatility in the excess foreign exchange market.
5. Common people also benefit from increasing foreign exchange. This gives money to spend on government schemes.
Component of foreign exchange reserves
Foreign currency assets, bonds, bank deposits, gold and financial assets are the largest constituents of domestic currency reserves. Foreign currency assets in India’s currency reserves have reached $ 563.46 billion. With this, gold reserves increased to $ 38.10 billion. Reserves with the International Monetary Fund have reached $5.01 billion. Due to this, the foreign exchange reserves have reached a record $ 608.081 billion.
In this way the currency reserves increased
India’s total foreign exchange reserves were $ 1.2 billion in 1991, which has increased to a record level of $ 604.80 billion in the last 20 years. India’s current foreign exchange reserves have the capacity to handle the country’s 15-month import bill. The ever-increasing foreign exchange reserves are indicating the strengthening position of the country. Financial experts say that this momentum is expected to continue in the future as well.