ECONOMOIC II
India's Foreign Exchange Reserves:
Its sources of earning and spending
Prepared by: GROUP 3
WMP3001 ABHISHEK
WMP3017 BINAY KUMAR
WMP3030 MANISH POPLI
WMP3046 RAJIV POPLAI
WMP3058 UJJWAL KUMAR MAHANTI
Prepared for
Prof. K. G. Sahadevan
Course Instructor: Economics II
INDIAN INSTITUE OF MANGEMENT, LUCKNOW
NOIDA CAMPUS
29th August 2008
Table of Contents
List of Tables
List of Figures
Executive Summary
Introduction
Foreign Exchange Reserves:
The subject is receiving renewed global interest among policy makers and academicians against the backdrop of increasing globalization of emerging economies, acceleration of capital flows, and integration of financial markets domestically as well as globally. The debt crisis in some of the developing countries in the early nineties, the East Asian crisis in 1997 and more recently the currency crisis of Argentina have posed several dilemmas to policy makers on forex reserves.
Multilateral bodies, especially, the Bank for International Settlements (BIS) and International Monetary Fund (IMF) are attempting several initiatives in regard to international financial architecture in the context of the debt-banking-financial crisis in several countries, and matters relating to forex reserves have become an important component of this initiative, encompassing issues on policy, management and transparency.
There is some interest within India on our level of forex reserves, as evidenced by several articles in financial dailies, economic journals and research papers. There are also some differences among academics on the direct as well as indirect costs and benefits of the level of forex reserves, from the point of view of macro-economic policy, financial stability and fiscal or quasi-fiscal impact.
In India, the Reserve Bank of India Act 1934 contains the...