The Foreign exchange reserves of India are mainly composed of US dollar in the forms of US government bonds and institutional bonds. The main component is Foreign currency assets. As per the data furnished by the Reserve Bank of India in its weekly statistical supplement, India's total foreign exchange reserves stands at US$368.231 billion for the week ended November 11, 2016. In this, Foreign currency assets(FCAs) was US$343.927 billion, while gold reserves was US$20.46 billion. Gold reserves in India constitute nearly 15 percent of forex. India is, coincidentally the world's largest gold consuming nation. India is at 8th position in List of countries by foreign-exchange reserves , just below Republic of China (Taiwan) , Russia and South Korea. The Economic survey of India 2014-15 said India could target foreign exchange reserves of US$750 billion-US$1 trillion. Foreign exchange reserves act as the first line of defence for India in case of economic slowdown, but acquisition of reserves has its own costs.Foreign exchange reserves facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.
Contents
Composition
Reserve Bank of India Act and the Foreign Exchange Management Act, 1999 set the legal provisions for governing the foreign exchange reserves. Reserve Bank of India accumulates foreign currency reserves by purchasing from authorized dealers in open market operations. Foreign exchange reserves of India act as a cushion against rupee volatility once global interest rates start rising.
The Foreign exchange reserves of india consists of below four categories. (a) Foreign Currency Assets (b) Gold (c) SDRs (d) Reserve Tranche Position in the IMF