Foreign Exchange Reserves in India

Foreign Exchange Reserves in India

» The foreign exchange reserves of the country include three important components :
(i) Foreign Exchange Assets of RBI.
(ii) Gold Stock of RBI
(iii) SDR holdings of the Government.

» After 1991, Indian foreign exchange reserves have rapidly increased due to various reasons which are as follows :
(i) Devaluation of Rupee,
(ii) Availability of loans from international institutions,
(iii) Availability of foreign exchange from NRIs under various schemes,
(iv) Increased foreign investment (both direct and indirect),
(v) Full convertibility of Rupee on current account.

» FEMA (Foreign Exchange Management Act) came into force in July 2000. This FEMA has replaced Foreign Exchange Regulation Act., 1973 (FERA-1973).

» Under FEMA provisions related to foreign exchange have been modified and liberalised so as to simplify foreign trade and payments. FEMA will make favourable development in foreign Money Market.

» India's total external trade (exports plus imports including re-exports) in the year 1950-51 stood at Rs. 1214 crore. Since then, this has witnessed continuous increase with occasional downturns.

» India's share in total world trade has gone up from 1.1% in 2004—i.e. initial year of the Foreign Trade Policy (2004-09) to 1.5% in 2006. During 2008-09 the value of India's external trade reached Rs. 22,15,191 crore.

» India's imports were highest from Asia and ASEAN (35.22%) followed by West Europe (21.17%) and America (7.78%), during 2005-06.

» During 2009-10 India's imports reached to Rs. 13,63,736 crore from Rs. 13,74,436 crore in 2008-09, registering a negative growth of 0.78% in rupee terms. In US $ terms, imports reached a level of US $ 288.37 billion in 2009—10, registering a negative growth of—5.05%.

» During 2009-10, UAE (13.4%) has been the most important country to export destination followed by USA (10.9%), China (6.5%), Hong Kong (4.4%), Singapore (4.2%), Netherlands (3.6%), U.K. (3.5%), Germany (3%), Saudi Arabia (2.2%).

» Asia and ASEAN accounted for 60.9% of India's total imports during 2009-10 followed by Europe (19.2%) and America (10.2%). Among individual countries the share of China stood highest at 10.7% followed by UAE (6.8%), Saudi Arabia (5.95%), USA (5.9%).

» During 2009-10, the share of Asia and ASEAN region comprising South Asia, East Asia, North East Asia, WANA accounted for 53.93% of India's total exports.

» Trade deficit decreased during 2009-10 to Rs. -5,18,202 crore as against Rs. -5,33,681 crore - during 2008-09. In Us $ terms also, trade deficit decreased to US $ 109.6 billion from a level of US $ 118.4 billion during 2008-09.

» The share of Europe and America in India's exports stood at 21.56% and 15.02% respectively of which EU countries (27) comprises 20.17%.