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India’s foreign exchange reserves comprise of:

Question

India’s foreign exchange reserves comprise of:

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Solution

India's foreign exchange reserves are made up of the following components:

  1. Foreign Currency Assets (FCA): This is the largest component of the forex reserves and includes the effect of appreciation or depreciation of non-US currencies such as the euro, pound, and yen held in reserves.

  2. Gold Reserves: This is the second largest component. The Reserve Bank of India (RBI) holds 618.16 tonnes of gold, which is a significant part of the forex reserves.

  3. Special Drawing Rights (SDRs): SDRs are international reserve assets created by the International Monetary Fund (IMF) and allocated to its members in proportion of their quotas.

  4. Reserve Tranche Position (RTP) in the IMF: This is the difference between India’s quota and the IMF and the country’s holding of IMF’s currency.

These four components together make up India's foreign exchange reserves.

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