Forex Reserves

Why is it in the news?
  • The foreign exchange reserves hit an all-time high of $439.7 billion for the week ended October 11.
More in the news
  • Causes behind the rise in Reserves:
(1) Positive flow of funds from foreign portfolio investors (FPIs).
(2) Decline in forex outgo on account of continued slide in crude oil prices.
(3) Stable currency.
  • Relief:
(1) The rise in forex reserves comes as a breather for the country’s rising external debt.
(2) The external debt has risen significantly over the last couple of years-from $485 billion in June 2017 to $557 billion in June 2019.
(3) If external debts are higher than the forex reserves, it makes the economy vulnerable to any oil price shocks.
(4) Over the past one year, there has been a rise in external debt as India Inc. has turned towards foreign markets to raise funds.
(5) This has happened because of the liquidity situation tightening in the domestic financial market.
Source
Indian Express.
Posted by Jawwad Kazi on 21st Oct 2019
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