This article deals with ‘Forex Reserves of India .’ This is part of our series on ‘Economics’ which is important pillar of GS-3 syllabus . For more articles , you can click here .
Current Status of Forex Reserves of India
The total foreign currencies
(of different countries) an economy possesses at a point of time is its
‘foreign currency reserves or forex reserves’.
India’s forex reserves, is
about $460 billion (Jan 2020) .
It is enough to finance 11 months of imports, compared to 7.8
months in March 2014 (just before the Narendra Modi government came to
power and 2.5 months in March 1991 (which forced the country to seek
International Monetary Fund assistance).
Ranking of Foreign Reserves
Foreign Currency and Foreign
SDR’s Reverse Tranche
of Forex Reserves ( India 8th and China topped with 3.2 Trillion Forex)
Currency Swap Agreements of India
of different countries sign Currency Swap Agreements with each other to
help each other in time of crisis.
has signed such agreement for Swap in time of Crisis to the tune of $ 75
agreements have been signed by India with various other countries.
Side Topic : How China reached to top position in foreign exchange Reserve ?
Term used by
Economic Survey for this phenomenon is ‘China’s Mercantile Policy‘ . Under this policy, China refrains from
imports from other countries but at the same time, exports are encouraged.
China restrains from Imports in following ways
SOE (State Owned Enterprises) opaquely controls the domestic market
Inordinate delay in clearance
SPS agreements used to ban
Domestic products are too cheap
And at the same
time, Exports are promoted by
SOE get cheap loans
Subsidies are provided on large scale
Coal , iron, rare earth metals are also exported
Manipulators of Currency
Department makes list of countries which manipulate their currency .
include any country in this list : 3 conditions .
Trade surplus of over $20 billion with the US .
Current account surplus of 3% of the GDP with rest of the world.
Persistent foreign exchange purchases of 2% plus of the
GDP over 12
In 2018, India was included in this list. But , India was removed in
which are included in this list includes countries