Forex Reserves : Forex Reserves Decline by $8.31 bn to $566.94 bn
India’s foreign exchange reserves declined by $8.31 billion to $566.94 billion in the week ended April 9, 2021, mainly due to a fall in foreign currency assets (FCA), as per the Reserve Bank of India (RBI) weekly statistical supplement data.
The FCA, which is the largest component of the forex reserves, fell by $8.01 billion to $522.12 billion in the week ended April 9, 2021. Meanwhile, the gold reserves remained unchanged at $34.50 billion, the special drawing rights (SDRs) with the International Monetary Fund (IMF) decreased by $2 million to $1.48 billion, and the country’s reserve position with the IMF declined by $284 million to $4.84 billion.
India’s forex reserves comprise foreign currency assets (FCA), gold reserves, SDRs with the International Monetary Fund (IMF), and the country’s reserve position with the IMF.
The country’s reserve position with the IMF is an asset that reflects India’s reserve holdings with the IMF. SDRs are international reserve assets that were created by the IMF to supplement the official reserves of its member countries.
Why this News is Important
The decline in India’s forex reserves is important because forex reserves are an important indicator of a country’s economic health. Forex reserves represent a country’s ability to pay for imports and service its external debt. They also help a country to maintain the value of its currency in the international market. In the context of government exams, this news is important for students preparing for the banking and civil service positions such as PSCS to IAS as they are expected to have knowledge about the country’s economic health and financial indicators.
Historical Context
India’s foreign exchange reserves have been on the rise for the past few years. As per the RBI’s data, India’s forex reserves increased by $5.42 billion to $581.21 billion in the week ended February 5, 2021, a new record high. In 2020, the country’s forex reserves increased by $88.17 billion to $584.55 billion, the highest ever. This was due to a significant increase in foreign direct investment (FDI) and foreign portfolio investment (FPI) in the country.
Key Takeaways from “Forex Reserves Decline by $8.31 bn to $566.94 bn”
| Serial Number | Key Takeaway |
|---|---|
| 1 | India’s foreign exchange reserves declined by $8.31 billion to $566.94 billion in the week ended April 9, 2021. |
| 2 | The decline was mainly due to a fall in foreign currency assets (FCA), which is the largest component of the forex reserves. |
| 3 | The country’s reserve position with the IMF declined by $284 million to $4.84 billion. |
| 4 | SDRs with the International Monetary Fund (IMF) decreased by $2 million to $1.48 billion. |
| 5 | Forex reserves represent a country’s ability to pay for imports and service its external debt, and they help a country to maintain the value of its currency in the international market. |
In conclusion, the decline in India’s forex reserves is an important indicator of the country’s economic health, and it is important for students preparing for government exams to have knowledge about it. While
Important FAQs for Students from this News
Q. What are forex reserves?
A. Forex reserves are foreign assets held by a central bank or monetary authority in various reserve currencies.
Q. Why are forex reserves important?
A. Forex reserves provide a buffer against external financial shocks and are used to support the domestic currency, repay foreign debt, and maintain economic stability.
Q. What is the current status of India’s forex reserves?
A. As per the latest data, India’s forex reserves declined by $8.31 billion to $566.94 billion in the week ended April 9, 2021.
Q. What are the factors that contribute to the fluctuation of forex reserves?
A. Factors such as imports, exports, foreign direct investment, remittances, and exchange rate fluctuations can impact a country’s forex reserves.
Q. How does the decline in forex reserves affect the economy?
A. A decline in forex reserves can lead to a depreciating currency, higher inflation, and reduced investor confidence, which can have a negative impact on the economy.
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