India's
foreign exchange reserves have grown significantly since 1991.
The reserves, which stood at US$ 5.8 billion at end-March
1991 increased gradually to US$ 25.2 billion by end-March
1995. The growth continued in the second half of the 1990s,
with the reserves touching the level of US$ 38.0 billion by
end-March 2000. Subsequently, the reserves rose to US$ 76.1
billion by end-March 2003, US$ 113.0 billion by end-March
2004, US$ 141.5 billion by end-March 2005 and further to US$
143.1 billion by end-September 2005. It is a matter of concern
that India's foreign exchange reserves fell to $272.722 billion
on December 21, 2007 from $272.954 billion a week earlier.
The central bank said foreign currency assets, expressed in
US dollar terms, included the effect of appreciation or depreciation
of other currencies held in its reserves such as the euro,
pound sterling and yen. Last year the forex reserve was 176.2330
billion and prior to this on December 7, the foreign exchange
reserve was at its record at 273 billion and 55 crores 30
lakh. Prior to this week the reserve had come down by 59 million
90 crore dollars. And in the period ending December 21, the
fall in the foreign exchange reserve was $43 crore and 20
lakh. Thus during the two-week period the decline in the forex
has been more than $ 1 billion. Experts fear such drastic
fall in the forex reserves could have damaging effects for
India's economy. The Union government has been making concerted
efforts to tame inflation and recently the inflation rate
had also come down. But the continuous decline in foreign
exchange reserves would deal a blow to the efforts of the
government in controlling inflation. There is fear that inflation
would rise as a result of drop in the foreign exchange reserves.
One of the reasons for drop in the foreign reserve could be
non-supply of the currency from exporters. Even though the
situation of foreign exchange is better as compared to last
year yet it is utmost essential to fill the shortcomings in
the forex reserves. The Reserve Position in the IMF is down
$2 million at $428 million. The foreign exchange reserves
include India's Reserve Tranche Position in the International
Monetary Fund.
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