India's $400-billion forex reserves comes at a cost

Why America's misgivings about India's burgeoning forex reserves are misplaced. By exchange reserves has given a sense of satisfaction for many who were tired of frequent sell-off of the currency and the Reserve Bank of India’s inability to protect the slide in its value. But have things changed so dramatically that India needs to be put.

Reserves are used as savings for potential times of crises, especially balance of payments crises. She is the first Indian woman to win an Olympic medal,a bronze medal for weightl

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Sep 29,  · And, ammunition to arrest a rapid rupee slide, says Anup Roy. | India's $billion forex reserves comes at a cost. However, even that would be limited and the Reserve Bank of India (RBI.

Domestic consumers are adversely affected by low exchange rates. Low exchange rates for the Indian Rupee are inflationary because imported goods become more expensive. RBI may then spend foreign exchange reserves to buy domestic currency and strengthen its value--when low exchange rates and inflation are concerns. Last week RBI sold dollars to arrest rupee's slide. The Foreign exchange reserves of india consists of below four categories. It was created in to supplement a shortfall of preferred foreign exchange reserve assets, namely gold and the US dollar, the SDR's value is defined by a weighted currency basket of four major currencies: This basket is re-evaluated every five years,and the currencies included as well as the weights given to them can then change.

The primary means of financing the International Monetary Fund is through members' quotas. So, reserves should be seen as a macro prudential tool. The IMF External Sector Report said that 11 advanced economies had current account surpluses in , and one-third of them have excessive surpluses creating global imbalances in trade and consumption. The IMF identified that real effective exchange rates in these countries with surpluses were generally undervalued.

While export-dominated economies such as China and Japan have often used currency as a tool to retain competitive advantage in global trade, India uses it more to temper the volatility in the currency markets and to keep its monetary policy effective. Read more on Foreign Exchange Reserves. My Saved Articles Sign in Sign up. Find this comment offensive? This will alert our moderators to take action Name Reason for reporting: Foul language Slanderous Inciting hatred against a certain community Others.

Get instant notifications from Economic Times Allow Not now. Forex reserve in comfortable range, says DBS. Comfortable forex reserves to deal with rupee volatility: Choose your reason below and click on the Report button. This will alert our moderators to take action. Get instant notifications from Economic Times Allow Not now You can switch off notifications anytime using browser settings.

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