• Dr. Fareed Ahmed

An adequate level of foreign exchange reserves has become an important parameter for determining a country’s ability to absorb external shocks. An attempt has been made in this paper to study the trends, composition and assess the adequacy of India’ reserves. The trend in India’s forex reserves revealed that despite liberalization of the economy and adoption of current account convertibility since the early 1990s, reserve level remained low during the 1990s.The pace of reserve buildup accelerated since 2000 due to various factors and increased manyfold during the study period from a meagre amount of US$ 5.8 billion in1991 to US$ 561 billion as of February,2023. A good amount of reserves also accumulated during the pandemic period. The analysis of composition of reserves indicated that the share of gold in total forex reserves has fallen drastically and consequently the share of foreign currency assets increased substantially as compared to the period prior to liberalization of the Indian economy. The different measures of estimating adequacy level of reserves applied in this study showed that the country holds reserves more than the adequate level. If any particular shock affects the economy, then it has a greater capacity to absorb the shock. In more extreme situations, even if the entire economy goes into depression and there is a sudden stop of foreign capital inflow, then also the country has sufficient reserves to endure the shock for certain periods. Moreover, reserves are only one part of a country’s defense against shocks.

Foreign Exchange Reserves, Current Account Deficit, Adequacy, Foreign Currency Assets

"Are India’s Forex Reserves adequate?", International Journal of Emerging Technologies and Innovative Research (www.jetir.org), ISSN:2349-5162, Vol.10, Issue 3, page no.c652-c672, March-2023, Available :http://www.jetir.org/papers/JETIR2303274.pdf

"Are India’s Forex Reserves adequate?", International Journal of Emerging Technologies and Innovative Research (www.jetir.org | UGC and issn Approved), ISSN:2349-5162, Vol.10, Issue 3, page no. ppc652-c672, March-2023, Available at : http://www.jetir.org/papers/JETIR2303274.pdf