has large foreign-exchange reserves; holdings of cash, bank deposits, bonds, and other financial assets denominated in currencies other than India's national currency, the Indian rupee. The reserves are managed by the Reserve Bank of India for the Indian government and the main component is foreign currency assets. Foreign-exchange reserves act as the first line of defense for India in case of economic slowdown, but acquisition of reserves has its own costs. Foreign exchange reserves facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India. India's total foreign exchange reserves stand at around US$522.630 billion on 24 July 2020, the highest ever, with foreign exchange assets component at around US$480.482 billion, gold reserves at around US$36.10billion, SDRs of around US$1.464 billion and around US$4.585 billion reserve position, as per Reserve Bank of India's weekly statistical supplement published on 24 July 2020. The Economic survey of India 2014-15 said India could target foreign exchange reserves of US$750 billion-US$1 trillion. As of December 2019, India's foreign exchange reserves are mainly composed ofUS dollar in the forms of US government bonds and institutional bonds. with nearly 6.9% of forex reserves in gold. The FCAs also include investments in US Treasury bonds, bonds of other selected governments and deposits with foreign central and commercial banks. India is at 5th position in List of countries by foreign-exchange reserves, just below Russia.
Composition
Act and the Foreign Exchange Management Act, 1999 set the legal provisions for governing the foreign exchange reserves. Reserve Bank of India accumulates foreign currency reserves by purchasing from authorized dealers in open market operations. Foreign exchange reserves of India act as a cushion against rupee volatility once global interest rates start rising. The Foreign exchange reserves of India consists of below four categories;
In 1960, forex reserve covered just 8.6 weeks of imports
In 1980, India had foreign exchange reserves of over U$7 billion, more than double the level of what China had at that time.
In 1990, forex reserve covered just 4.8 weeks of imports
Foreign exchange reserves of India reached milestone of $100 billion mark only in 2004.
India was forced to sell dollars to the extent of close to U$35 billion in the spot markets in Financial Year 2009 due to 22% depreciation in rupee in the same fiscal year 2009.
