“I believe India’s currency should appreciate now. What else will we do with $700 billion (forex reserves),” Goyal said at an event in Mumbai.
India now has the world’s fourth largest armoury of foreign exchange reserves that crossed the $700-billion mark for the first time in September.
India’s reserves-comprising major currencies, gold special drawing rights and reserves with the International Monetary Fund (IMF)-have been rising steadily since 2013, when the country was part of the “fragile five” category and foreign investors exited because of weak macroeconomic fundamentals.
Today, only China, Japan and Switzerland hold higher reserves than India. An analysis of June end data of standard reserve adequacy measures shows India is in the middle of the pack.
In terms of the ability of the reserves to finance the country’s imports or import cover of reserves, India’s reserves were adequate to fund 11.9 months’ imports-way above the norm which is considered to be six months-as of June end.But some of its peers like Brazil and Russia were doing still better, with 17.8 months’ cover and 25.7 months’ cover, respectively.