Importance of Increasing Foreign Exchange Reserves: UPSC Daily Important Topic | 23 January 2022
Importance of Increasing Foreign Exchange Reserves
•The government is in a comfortable position if there are rising forex reserves and the RBI in managing India’s external and internal financial issues at a time of major contraction (23.9%) in economic growth.
•It Assist the government in meeting its foreign exchange needs and external debt obligations.
•Appreciation in Rupee – The rising foreign exchange reserves has helped the rupee to strengthen against the dollar.
•Crisis Management: Rising Forex Reserve serves as a cushion in the event of a Balance of Payment crisis on the economic front. It is enough to cover the import bill of the country for a year. Know more about the Balance of Payment on the linked page.
•Confidence in the Market: Forex Reserves will provide a level of confidence to markets and investors that a country can meet its external obligations.
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