India’s foreign exchange rose to USD 658.09 billion in November 2024 after eight weeks of decline, following the peak of USD 704.89 billion in September 2024.
What are Foreign Exchange Reserves?
About: Foreign Exchange Reserves are assets held in foreign currencies in reserve by a central bank.
It can include banknotes, deposits, bonds, treasury bills, and other government securities.
Following the 1990-91 economic crisis, C. Rangarajan and Y.V. Reddy’s committee recommended maintaining forex reserves for 12 months of imports.
Components: India’s Forex Reserve includes:
Foreign Currency Assets (FCA): FCA is predominantly composed of major global currencies like the US Dollar, Euro, and Japanese Yen.
Gold Reserves: Gold has long been valued as a key reserve asset offering both stability and universal acceptance.
Special Drawing Rights (SDRs): SDRs, created by the International Monetary Fund (IMF), are reserve assets that supplement member countries’ official reserves.
Reserve position with IMF: It is a portion of the required currency quota each member country must provide to the IMF.
Match the following components of India’s Forex Reserves with their descriptions:
| Component | Description |
| 1. Foreign Currency Assets | A. Includes US Dollar, Euro, and Japanese Yen reserves |
| 2. Gold Reserves | B. Reserve asset created by IMF |
| 3. Special Drawing Rights | C. Key reserve asset valued for stability |
Options:
(a) 1-A, 2-B, 3-C
(b) 1-A, 2-C, 3-B
(c) 1-B, 2-C, 3-A
(d) 1-C, 2-A, 3-B
Answer: (b)
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