Foreign Exchange Reserves In India
The Indian economy is a story of ups and downs. There was a time when the foreign exchange reserves in India had fallen so low that the administration had to consider mortgaging the gold reserves of the country to Bank of England in order to have a supply of foreign currency. But with the gradual opening up of the Indian economy, the conditions have not only improved but today India has one of the biggest foreign exchange reserves in the entire world.
The rise of foreign exchange reserves of India have gone through a chain of events but there are two prominent milestones in this. The first milestone was reached in March 2005. This was the time when the foreign exchange reserves in India reached the $140 billion mark. At this instance, the foreign exchange reserves in India became the sixth largest in the entire world. This was just in a period fifteen years or so. The mortgage was considered in early 1990s.
The main reason behind the fact that India was able to achieve this massive feat was the opening up of the Indian economy for foreign investment. While foreign investment was also possible earlier, the process was ridiculously complicated and all the people who wanted to invest in the country were put off by the red-tapism and bureaucratic hurdles.
With the opening up of the country for the foreign investment, the foreign exchange started to pour in. The money came in the form of foreign direct investment, purchase of Indian stocks and bonds by the foreign nationals as well as foreign organizations. The share prices reached new heights and stock exchanges became bullish. The price of Indian rupee also went high and was able to rein in the inflation rates. The second milestone of foreign exchange reserves in India came much more recently, On October 27. 2007, the foreign currency reserves of India crossed that of South Korea to become the fifth highest in the world. This made India a member of the elite club of five countries with the maximum amount of foreign exchange as their reserve. At $261 billion, the foreign exchange reserves in India are a tad bit higher than those of South Korea with $257 billion at the time the country last reported its reserves. But this is not all. India is expected to climb another step soon. At present, the king of the hill is People's Republic of China with a reserve of magnanimous $1,434 billion. It is followed by Japan with $946 billion, Russia with $440 billion forms the third place and Taiwan with $263 billion is at fourth place. Aided with the flow of money due to the housing mortgage crisis in United States, the foreign exchange reserves in India are expected to overtake Taiwan and push it back to fifth position and take its fourth position.
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