Kolkata: Even when the economic discourse of India revolves around the impact of the 50% tariff slapped by US President Donald Trump on goods imports from India, the forex reserves of the country touched $693.618 billion in the week ending August 8, revealed data from Reserve Bank of India. The figure is only 1.64% away from the historic high of $704.885 billion which was recorded in September last year.
According to the RBI data, the forex reserves of the country rose by $4.747 billion in the week ending August 8. The central bank said the rise was both due to a rise in assets denominated in foreign currency and gold holdings. In the week preceding that week, the forex reserves went down by $9.32 billion.
But how big is the amount, or what is its significance? The amount is about the amount that can pay for the country’s exports for as many as 11 months.
It can be recalled that in March 1991, India’s forex reserves collapsed to $5.8 billion against a foreign debt of about $72 billion. The situation was so critical that the economic reforms were inaugurated by Manmohan Singh, who was the finance minister under P V Narasimha Rao.
According to the RBI figures gold reserves in the country went up by $2.16 billion and was recorded at $86.16 billion during the week ending August 8. As per the data, India’s reserve position with the IMF rose $45 million at $4.73 billion in the same week. The special drawing rights stood at $18.74 billion after rising $169 million during the week.
Significantly, India’s central bank intervenes in the market through liquidity management intermittently. This involves selling of dollars, almost always done for preventing a steep depreciation in the rupee. This also mostly nets a big profit for the RBI. It is one of the tasks of RBI to closely monitor the foreign exchange markets. The RBI intervenes to maintain proper market conditions by reining in excessive volatility in the exchange rate.