According to recently released Reserve Bank of India (RBI) data, India’s foreign exchange (forex) reserves rose by US $1.368 billion to reach US $420.055 billion in the week to May 10, 2019. The rise was on account of rise in foreign currency assets.
Breakaway of forex reserves (in the reporting week)
They are reserve assets held by central bank of the country in foreign currencies. These reserve acts as buffer to be used in challenging times. They are also used as back liabilities and also to influence monetary policy. Almost all countries in world, regardless of size of their economy, hold significant forex reserves.
Components of India’s FOREX Reserves: Foreign currency assets (FCAs), Special Drawing Rights (SDRs), Gold Reserves and RBI’s Reserve position with International Monetary Fund (IMF). FCAs constitute largest component of India’s forex Reserves. It is expressed in dollar terms and includes effect of appreciation/depreciation of non-US units like the euro, pound and the yen held in the reserves.
Note: India’s forex reserves had touched life-time high of US $426.028 billion in week to April 13, 2018.