November 17, 2021

India’s foreign exchange reserves will help tide global spillovers, RBI says

India’s foreign exchange reserves have by all indications crossed $600 billion, central bank chief Shaktikanta Das said, a huge buffer that will help insulate Asia’s third-largest economy from global spillovers and volatile external flows.

Earlier this year, the country’s foreign-exchange reserves briefly surpassed Russia’s to become the world’s fourth-largest, as the Reserve Bank of India continued to hoard dollars to cushion the economy against any sudden outflows. The reserves are enough to cover around 15 months of imports and have been bolstered by rising inflows into the booming stock market and foreign direct investments.

“While these flows ease external financing constraints, they also impart volatility to financial markets and asset prices, while producing undesirable and unintended fluctuations in liquidity that can vitiate the monetary…

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