The foreign-exchange reserves of India became the world’s fourth-largest. India has surpassed Russia to become the 4th largest in the world.
Key Points
- The central bank of India continues to hoard dollars to cushion the economy against any sudden outflows.
- Reserves for both nations have mostly flattened out this year after months of rapid increase.
- India surpassed Russia as Russian holdings declined at a faster rate in the recent weeks.
- The Reserve Bank of India said that the country’s foreign currency holdings decreased by $4.3 billion to $580.3 billion as of March 5, edging out Russia’s $580.1 billion pile.
- China has the largest reserves and is followed by Japan and Switzerland on the International Monetary Fund table.
- India’s reserves, enough to cover around 18 months of imports, have been bolstered by a rare current-account surplus, rising inflows into the local stock market, and foreign direct investment.
- Analysts say a strong reserves position gives foreign investors and credit rating companies added comfort that the government can meet its debt obligations despite a deteriorating fiscal outlook and the economy heading for its first full-year contraction in more than four decades.
- RBI bought a net of $88 billion in the spot forex market last year. That helped make the rupee the worst performer among Asia’s major currencies last year. This also made India to be included in the U.S. Treasury watchlist for currency manipulation.
A recent RBI report recommended further strengthening of foreign-exchange reserves, citing swings in the rupee around the time of the global taper tantrum in 2013.
