The global economy has been badly hit by the Covid-19 pandemic. Most countries are expected to face recessions in 2020. As far as the Indian economy is concerned, we are in recession now. As per the much-awaited data, GDP contracted by 23.9 per cent, the worse ever recorded in India’s history.
The condition across the globe is critical but we know–this too shall pass. Amid the COVID-19 crisis and the looming economic recession, here is some good news to give you a sigh of relief.
India’s foreign exchange reserves surged by $3.883 billion to touch a lifetime high of $541.431 billion in the week ended August 28, according to the latest data put out by the Reserve Bank of India (RBI). In the previous week ended August 21, the reserves had risen by $2.296 billion to $537.548 billion.
Foreign currency assets (FCA), which form a key component of reserves, rose by $3.925 billion to $498.094 billion. FCAs are maintained in major currencies like the US dollar, euro, pound sterling and Japanese yen.
Movement in the FCA occurs mainly on account of purchase or sale of foreign exchange by the RBI, income arising out of the deployment of foreign exchange reserves, external aid receipts of the government and revaluation of assets.
India’s foreign exchange reserves have steadily increased over the last six decades. The World Bank report states India’s total foreign exchange (Forex) reserves stood at $67 million in 1960, which has increased to $ 541.431 billion in 2020.
What are foreign exchange reserves?
Foreign exchange reserves are assets held by a central bank of a country, usually in various reserve currencies, mostly the United States dollar, and to a lesser extent the euro, the pound sterling, the Japanese yen, and used to back its liabilities.
It should be noted that India’s foreign exchange reserves have been steadily increasing over the past few years. India, at present, is the 5th largest foreign exchange reserves holder in the world after China, Japan, Switzerland and Russia, as per the International Monetary Fund. This is extremely significant for the nation, especially in the wake of Coronavirus pandemic, which had a major impact on the Indian economy along with the world.
India’s foreign exchange reserves have received a huge boost due to a rare current-account surplus in the first quarter, return of inflows into the local stock market and foreign direct investment, including major investments in Reliance Jio platforms during these past two months. Reliance Industries is India’s largest company by revenue and investments in its Jio Platforms helped the Reserve Bank of India to accumulate a total of USD 25 billion in foreign exchange in the quarter through June.
