In a recent press release, Reserve Bank of India informed that foreign currency assets had seen a rise of 8.22 billion dollars. It is a significant part of overall reserves RBI has. This is for the first time that India’s foreign exchange reserves have crossed the half-a-trillion US Dollar mark. By the end of the first week of June, i.e., 5th June 2020, India had 501.70 billion dollars in foreign exchange reserves.
In the previous week, the reserves rose by 3.44 billion dollars and touched 493.48 billion dollars mark. On the other hand, the value of the gold reserve has continued to decline. By 5th June, gold reserves declined by 329 million dollars and stood at 32.352 billion dollars. The exclusive drawing rights of India with the International Monetary Fund have gone up by 10 million dollars and currently stands at 1.44 billion dollars. The reserve position of India rose by 120 million dollars and now stands at 4.28 billion dollars.
Sanjeev Sanyal, Principal Economic Adviser in the Ministry of Finance, said in a tweet that demand suppression is going to push INR to appreciate after an initial capital outflow. He added in a linked tweet that as India has opened its doors to the economy to remove demand suppression and push up credit growth, imports and foreign capital inflows will revive.
India’s Foreign Exchange Reserves hit USD501.7 billion. As I have been saying in recent weeks, demand suppression (such a lockdown) would push the INR to appreciate after an initial capital outflow. 1/n https://t.co/jxIYNAr8t1— Sanjeev Sanyal (@sanjeevsanyal) June 12, 2020
Now, as we open the economy to remove demand suppression, and push up credit growth, we will both revive imports and foreign capital inflows. The point is that demand identities imply macro-dynamics that is quite different from what naive forecasters suggest 2/n— Sanjeev Sanyal (@sanjeevsanyal) June 12, 2020
Forex exchange reserves have seen steady growth since September last year
The Forex reserve in India has seen a steady spike since Finance Minister Nirmala Sitharaman announced a corporate tax cut in September 2019. There has been a sharp decline in crude oil prices in the global market in the last few months that also helped India in improving foreign exchange reserves.