India’s foreign-exchange reserves become the world’s fourth largest, surpassing Russia. These reserves are enough to cover roughly 18 months of imports, have been strengthened by a rare current-account surplus, rising inflows into the local stock market and foreign direct investment.
According to analysts a strong reserves position gives foreign investors and credit rating companies added comfort that the government can meet its debt requirements despite a deteriorating fiscal outlook and the economy heading for its first full-year contraction in more than four decades.
India’s foreign currency holdings fell by $4.3 billion to $580.3 billion as of March 5, Russia’s current holdings is $580.1 billion. China has the largest reserves, followed by Japan and Switzerland on the International Monetary Fund table.
The RBI has bought a net $88 billion in the spot forex market last year that make the rupee the worst performer among Asia’s major currencies last year; lead India a place on a U.S. Treasury watch list for currency manipulation.
A current RBI report suggested there will be further strengthening of foreign-exchange reserves by citing swings in the rupee around the time of the global taper outburst in 2013. RBI Governor Shaktikanta Das has said that emerging market central banks need to build reserves to prevent any external shocks, irrespective of being put on watch by the U.S.