Amidst the fear
of global economic slowdown and flight of funds from emerging countries, surge
in India’s foreign exchange reserves has brought the much needed relief to the
system, lifting the outlook for Asia’s third biggest economy.
Under the
guidance of Reserve Bank of India (RBI) Governor, Raghuram Rajan, the foreign
exchange reserves have surged from a three-year low in September 2013 as he
stimulated inflows by offering discounted currency swaps to the banks.
Maintaining the
uptrend of the past several weeks, India’s forex reserves soared by USD 1.52
billion to a record high of USD 363.12 billion in the week ended April 29,
2016, the Reserve Bank of India noted.
The country's forex reserves had gone up by USD 1.35 billion to USD 361.601
billion in the week before.
What’s
driving the surge
The spike in
foreign exchange reserves was primarily on account of rise in the value of
foreign currency assets that constitute a major part of the overall reserves.
Foreign
currency assets, which are expressed in dollar terms and comprises the effect
of appreciation or depreciation of non US currencies such as euro, pound and
yen held in reserves, grew from USD 337.537 billion to USD 339.02 billion in
the week ended April 29, 2016.
Further, a
surge in the Indian rupee amid a pick-up in dollar inflows into local equity
and debt markets has given adequate opportunity to the RBI to purchase dollars
in the currency market.
Forex
reserve to help curb volatility
The central
bank is increasing reserves to stand any volatility in outflows amid sluggish
growth in China and forecasts that the Federal Reserve will consider raising US
interest rates.
Earlier this month,
Raghuram Rajan cut the benchmark interest rate and promised to end a prolonged
funding squeeze in the financial system by infusing cash via bond repurchases.
He said, the central bank would buy dollars and bonds to infuse funds into the
banking system.
A strong
forex reserves kitty will help the Indian economy overcome any possible
volatility in foreign capital flows amidst heightened global economic
uncertainty on account of weak commodity prices and worries over a China
slowdown. Latin Manharlal Group
Yes if forex keeps on showing this positive note then definitely India economy will be benefited from it. Traders also contribute in improving country's economic condition they should use good stock tips to earn their required returns as well.
ReplyDelete