Published: August 30, 2020 12:23:53 PM
The nation’s foreign exchange reserves rose by $ 2.296 billion to reach $ 537.548 billion in the week to August 21, according to data from the Reserve Bank of India (RBI).
In the previous week, ending August 14, reserves had fallen by $ 2.939 billion to $ 535.252 billion. The forex kit had risen by $ 3.623 billion to reach a record high of $ 538.191 billion in the week ending August 7th.
In the reporting week, the increase in reserves is mainly due to a jump in foreign currency assets (FCAs), a significant component of total reserves. The FCA rose $ 2.618 billion to $ 494.168 billion in the reporting week, central bank data showed.
Expressed in dollars, foreign currency assets include the effect of strengthening or depreciating units outside the United States such as the euro, the pound and the yen in the foreign exchange reserve. Gold reserves fell $ 331 million in the reporting week to $ 37.264 billion.
The special drawing rights with the International Monetary Fund (IMF) increased $ 2 million to $ 1.481 billion. The country’s reserve position with the IMF also rose by $ 6 million to $ 4.634 billion during the reporting week, the data shows.
The increase has been in several phases and has been led by various factors in the last ten months. Experts say that the increase in foreign exchange inflows through foreign portfolio investment (FPIs) and foreign direct investment (FDI) has also been supported by declines in the import bill over the last 4-5 months due to the decline in crude prices and trade impact following the Covid19 pandemic.
Rising foreign exchange reserves provide a lot of comfort to the government and the Indian Reserve Bank by managing India’s external and internal economic problems at a time when economic growth is set to contract by 5.8 per cent by 2020-21. It is a big pillow in case of crisis on the economic front and enough to cover the country’s import bill for a year. Reserves will give markets confidence that a country can meet its external obligations, demonstrate domestic currency support for external assets, help the government meet currency needs and external debt obligations.
– With PTI
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