RBI Current Affairs

India’s forex reserves at record high of $424.864 billion: RBI

According to the Reserve Bank of India (RBI), India’s forex (foreign exchange) reserves have touched record high of $424.864 billion in April 2018. The surge was due to massive spike in foreign currency assets (FCAs), a key component of the reserves. The forex reserve had crossed $400-billion mark for the first time in September 2017, but has since been fluctuating.

Forex Reserves

The forex are reserve assets held by a central bank in foreign currencies. It acts as buffer to be used in challenging times and used to back liabilities on their own issued currency as well as to influence monetary policy. Almost all countries in world, regardless of size of their economy, hold significant foreign exchange reserves.

The components of India’s FOREX Reserves include Foreign currency assets (FCAs), Gold Reserves, Special Drawing Rights (SDRs) and RBI’s Reserve position with International Monetary Fund (IMF). FCAs constitute largest component of Indian Forex Reserves and are expressed in US dollar terms.

FOREX Reserves in April 2018

  • Foreign currency assets (FCAs): $399.776 billion.
  • Gold reserves: $21.484 billion.
  • SDRs with IMF: $1.534 billion.
  • Reserve position with the IMF: $2.070 billion.

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RBI switches back to GDP model from GVA model to measure economy

The Reserve Bank of India switched back to gross domestic product (GDP) model from the gross value added (GVA) methodology to provide its estimate of economic activity in the country. The switch to GDP is mainly to conform to international standards and global best practices.

Key Facts

The GVA methodology gives picture of state of economic activity from producers’ side or supply side whereas the GDP model gives picture from consumers’ side or demand perspective. Globally, performance of most economies is gauged in terms of GDP model. This is also approach followed by multilateral institutions, international analysts and investors because it facilitates easy cross-country comparisons.

Background

Government had started analysing growth estimates using GVA methodology from January 2015 and had also changed the base year to 2018 from January 2018. Even the Central Statistical Office (CSO) has started using GDP model as supply-side measure of economic activity as main measure of economic activities since January 15, 2018.

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