According to recent data from Reserve bank of India (RBI), India's Foreign Exchange (Forex) reserves posted a decline of USD 678 million during the week ended 21st January 2022 to reach USD 634.287 billion.
Context
According to recent data from Reserve bank of India (RBI), India's Foreign Exchange (Forex) reserves posted a decline of USD 678 million during the week ended 21st January 2022 to reach USD 634.287 billion.
Foreign Exchange Reserves/Forex Reserves
- The total foreign currencies (of different countries) an economy possesses at a point of time is its ‘foreign currency assets/reserves’.
- The Forex Reserves of an economy is its ‘foreign currency assets’ added with its gold reserves, SDRs (Special Drawing Rights) and Reserve Tranche in the IMF.
- Reserve Tranche is like an emergency account from which a portion of member country’s quota can be withdrawn without agreeing to conditions or paying a service fee.
- In a sense, the Forex reserves is the upper limit up to which an economy can manage foreign currency in normal times if need be.
- The adequacy of Forex Reserves is measured by Import Cover.
- The Import Cover for India at present is around 9.5 months meaning the country's foreign exchange reserves are enough to cover only 9.5 months long imports.
