India's forex reserves become the world’s 4th biggest
- Posted By
10Pointer
- Categories
Economy
- Published
15th Mar, 2021
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Context
- India’s foreign-exchange reserves surpassed Russia’s to become the world’s fourth-largest to $580.3 billion by edging out Russia’s $580.1 billion pile.
Forex Reserve status
- Reasons for the surge: India’s reserves, enough to cover roughly 18 months of imports because of:
- rare current-account surplus
- rising inflows into the local stock market
- foreign direct investment
- Significance: It will help in a government meeting its debt obligations.
- Rank: India comes at 4th place after China which has the largest reserves, followed by Japan and Switzerland.
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Foreign Currency Assets (FCAs)
- Foreign exchange reserves: These are assets denominated in a foreign currency that is held by a central bank.
- Regulation: Reserve Bank of India Act and the Foreign Exchange Management Act, 1999 set the legal provisions for governing the foreign exchange reserves.
- Significance: Foreign exchange reserves of India act as a cushion against rupee volatility once global interest rates start rising
- Categories: The Foreign exchange reserves of India consists of four categories
- Foreign Currency Assets
- Gold
- Special Drawing Rights(SDRs)
- Reserve Tranche Position
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