India’s Forex reserves cross $400 billion for first time

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According to Reserve Bank of India (RBI), India’s foreign exchange (Forex) reserves have crossed dollar 400 billion marks for the first time. The increase was due to a sharp rise in foreign currency assets. India is now at the sixth position in Forex reserves ranking behind China (3,053 billion reserves), Japan (dollar 1,188 billion), Switzerland (dollar 743 billion).

After hitting the dollar 300 billion mark in 2008, it took the country over nine years to cross the dollar 400 billion level. Foreign exchange reserves had earlier topped dollar 300-billion in March 2008, months before the global financial crisis hit Indian rupee and the economy.

In August 2013, the rupee plummeted to an all-time low of 68.85 against the dollar following the US Federal Reserve’s decision to roll back its stimulus programme. Raghuram Rajan, who was RBI Governor then, announced a series of measures to shore up the rupee and foreign exchange reserves, leading to a gradual strengthening of the rupee and steady build-up of forex reserves.

The Reserve Bank of India said foreign currency assets were dollar 376.20 billion, gold reserves at dollar 20.69 billion, SDRs of dollar 1.52 billion and dollar 2.30 billion reserves in IMF. However, the huge reserves have not given adequate returns to the country. The RBI’s return from foreign currency assets is now only 0.80 per — the lowest in the last 15 years — compared with 1.29 per cent in 2015-16. Its foreign currency assets are invested in various securities, other central banks and commercial banks abroad during the year ended June 2017.