Forex reserves

Forex reserves

Subject: Economy

Context: Maintaining a winning streak, the forex reserves swelled by $835 million to reach another record high of $612.73 billion in the week ended July 16, 2021, data from the Reserve Bank of India (RBI) showed.

• The FCA a major component of the overall reserves — rose by $463 million to $568.748 billion in the reporting week.
• Foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.
• Gold reserves were up by $377 million to $37.333 billion in the reporting week, the data showed.
• The special drawing rights (SDRs) with the International Monetary Fund (IMF) were up by $1 million at $1.548 billion.
• The country’s reserve position with the IMF declined by $7 million to $5.1 billion in the reporting week, the data showed.

Impact

• The rising forex reserves could bring some comfort to the government as well as the RBI in managing the external and internal financial issues at a time when the economy is facing
• It is a big cushion in the event of any crisis on the economic front and enough to cover India’s import bill for a year.
• An increase in the forex kitty could also help strengthen the rupee against the US dollar