Forex reserves (FER) hit a new lifetime high of $410 billion

Highlights:

  • Foreign Exchange Reserves (FER), crossed the $400 billion.
  • It has touched a new lifetime high of $409.366 billion aided by an increase in foreign currency assets.
  • In the previous week, foreign exchange reserves had spurted by $3.53 billion to reach $404.921 billion.
  • On September 8, the Forex Reserves had crossed the $400 billion mark for the first time at $400.727 billion and again after five weeks on December 1 at $400.742 billion.
  • The rise in India’s Forex Reserves was lauded by both Moody’s and S&P recently while evaluating the credit rating of the country, even as the US treasury frowned at the record stock.
  • According to the DBS group, India’s Forex reserves are a win-win situation if any international crisis arises amidst the fiscal slippage fear due to the crude oil price hovering over $65 per barrel.
  • The current Forex reserves are enough to cover close to 11 months of import.
  • Earlier, the RBI took just 11 months to reach the $300-billion mark in February 2008 from $200 billion of reserves it had in April 2007.
  • But since then it stood between $300 and $400, falling to nearly $399 billion.
  • India’s foreign reserves rose sharply driven by portfolio inflows, investment flows and a narrower current account deficit, it added.
  • However, the RBI did not specify the reason for the surge.
  • The US Treasury uses three criteria to determine manipulation: Bilateral trade surplus with the US to $20 billion, current account surplus at 3% of country’s GDP, and net purchases of foreign currency to 2% of country’s GDP over a year.
  • India’s foreign exchange buying had surged to 1.8% in 12 months till June, which was close to the 2% limit, but had not crossed it.