- India’s foreign exchange reserves has increased to a one-year high of $418.5 billion.The reserves has increased due to strong inflow of funds by Foreign Portfolio Investors(FPI).
- Further,RBI’s decision to conduct $10 billion dollar-rupee buy-sell swap auction between March and April 2019 has also contributed to the increase in reserves.
- The increase in forex reserves has also led to an improvement in India’s import cover.Further,the decline in imports would also lead to improvement in current account deficit.
- Foreign-exchange reserves are reserve assets held by a central bank in foreign currencies.It is used to back liabilities on their own issued currency as well as to influence monetary policy.
- These Foreign-exchange reserves serve many purposes but are most significantly held to ensure that a central government agency has backup funds if their national currency rapidly devalues or becomes altogether insolvent.
6 min read