December 2, 2021

India’s forex reserves take over Russia’s to be the 4th biggest globally

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India has taken the fourth position globally surpassing Russia’s foreign exchange reserves, as the South Asian nation’s central bank continues to collect dollars to support the economy for any sudden outflows.

Reserves of both the countries have reached a flat curve after rapid increase. India took the lead as Russian holdings fell at a faster rate in the current weeks.

India’s foreign currency holdings dropped by $4.3 billion to $580.3 billion till March 5, revealed the Reserve Bank of India on Friday surpassing the $580.1 billion pie. China comprises of the largest reserves, after which Japan takes the lead and Switzerland on the International Monetary Fun table.

India had adequate reserves to cover 18 months of imports, which has been boosted by a current account surplus, along with the inflows from the local stock market and foreign direct investment.

Before the data was published, Kaushik Das, chief India economist said, “India’s various reserves adequacy metrics have improved significantly, particularly in the last few years.” He further added, “The healthy FX reserves position should give enough comfort to RBI for dealing with any potential external shock-driven capital-stop or outflows in the period ahead.”

The RBI purchased a net of $88 billion for the spot forex market in 2020 according to the central bank data show, which pushed Indian Rupee as the worst performer among the Asian currencies and led to India’s positioning on a U.S. treasury watchlist over currency manipulation.

Based on the recommendations of the current RBI report, there is need for strengthening the foreign-exchange reserves, indicating swings in Indian rupee during the global taper tantrum in 2013. Emerging market central banks require to build reserves for prevention of incidence of any external shocks, though being placed on watch by US.

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