India has fifth largest forex reserves in world

[Contrarian]

India has fifth largest forex reserves in world


MUMBAI: India on Friday joined the elite group of world's five biggest holders of foreign exchange reserves as it added about $4.5 billion last week to take the kitty to $261 billion. The country surpassed South Korea, which had $257 billion in forex reserves as of September-end, to stand at the fifth spot. While India reports its reserve position every week, South Korea does so on a monthly basis.

China leads the pack with $1,434 billion, followed by Japan ($946 billion), Russia ($440 billion) and Taiwan ($263 billion). According to RBI's weekly bulletin released on Friday, India's foreign exchange reserves increased by about $4.5 billion during the week ended October 19.

The rate at which the country's foreign exchange kitty is growing, especially after the US housing mortgage crisis, the country will soon overtake Taiwan. Among the BRIC (Brazil, Russia, India and China) countries, Brazil has the lowest foreign exchange reserves of $164 billion, according to the latest IMF data.

The other major holders of foreign exchange reserves in the world include Singapore ($152 billion), Hong Kong ($141 billion) and Germany ($126 billion). Total foreign currency reserves of the members of the Eurosystem, including countries which have adopted Euro as their currency, have been estimated at $453 billion.

India's foreign exchange reserves have continued to grow despite the efforts of the government and Reserve Bank to moderate inflows and encourage outflows through various policy initiatives.

India has fifth largest forex reserves in world-India Business-Business-The Times of India

 

[acidwolf]

it cant be world it can be asia

 

[Contrarian]

The article quite clearly says 'in the World'.

 

[EagleEyes]

It probably does. Who knows. I like it.

Pakistan should compete.

 

[Neo]

It probably does. Who knows. I like it.

It does! India has 5th largest forex in the world.

Pakistan should compete.

Large Forex usually depend on size of trade, mainly exports and there's no use competing in this.
Our forex are good compared to the size of export but there's always room for improvement.

 

[bhangra12345]

Infact I would say excess forex reserves is a baggage in itself. If not invested properly, you are actually losing money on them, but they cannot be invested in long term papers/ so will always be invested in short term market. Add to that, you do not invest them in speculative issues, so all you get is the short term govt paper, which normally barely covers inflation, forget about adminstrative charges and issues.

 

[Bushroda]

Having a large amount of Forex Reserve helps improve the credit rating of a country. India's forex reserves are $250 billion & its current international debt is around $155 billion dollars. That makes India a net creditor. But ofcourse, as mentioned by Bhangra it needs to be utilized properly. At this moment when rupee is moving north, India desperately wants to curb on inflows. Having a large foreign exchange at this point isn't going to help. I think having forex enough to support one year's import is more than enough.

 

[Ababeel]

A question always come to my mind that if a country has such big reserves, can these reserves not be used to pay the debt and make the country free of debtors (WB / ADB /IMF / USA etc.)?
I am asking this question as I don't know much regarding this and I see same situation in different countries that they have huge reserves as well as huge debts but they are not paying them fast to get rid of the debts.

 

[Bushroda]

A question always come to my mind that if a country has such big reserves, can these reserves not be used to pay the debt and make the country free of debtors (WB / ADB /IMF / USA etc.)?
I am asking this question as I don't know much regarding this and I see same situation in different countries that they have huge reserves as well as huge debts but they are not paying them fast to get rid of the debts.

Let's say if India decides to pay back its $155 billion debt & clear its account then it would be left with a li'l over $100 billion enough to support only 6 months of import. So, eventually it'll have to again take loan to complete its import order. Also, with less forex reserves, the value of dollar would increase & it would put strain on the rupee. This inturn would lead to essential commodities getting expensive. This is the reason why countries donot just clear up their debts & only keep servicing it by paying the interest.

 

[bhangra12345]

A question always come to my mind that if a country has such big reserves, can these reserves not be used to pay the debt and make the country free of debtors (WB / ADB /IMF / USA etc.)?
I am asking this question as I don't know much regarding this and I see same situation in different countries that they have huge reserves as well as huge debts but they are not paying them fast to get rid of the debts.

Yes, you would like to. It is the norm anywhere in the world. India paid off its IMF's loan ahead of its schedule.

You normally retire high interest loans earlier and if the other loans are lower than the (inflation + market exchange changes), it is beneficial to infact have them, because you are taking a higher amount and then paying back a lower amount.

It is these loans like the Japan's loans, WB loans come under.

Then there are contractual obligations, that asks you to pay only on specific dates, i.e. loans which you cant retire early.

This is for Govt/ private institution.

For the Govt, understand that the forex reserves not only includes the loans taken by the govt itself, but also the foreign loans taken by the private parties of India. These cannot be returned by the Govt directly in any way. There is only a small amount of loan which you can retire/pay off early and with high interest rates, these have already been paid off.

 

[Bull]

Pakistan should compete.

If you start comparing figures for what it is, the picture would be imperfect. Size of the country, its trade, its GDP,external debt, dependency on imports, crude prices all have to be taken into consideration.