Foreign exchange reserves, expenditure: India

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This is a collection of articles archived for the excellence of their content.

Increases and decreases over the years

1950-1951 to 2013-2014: Foreign Exchange Reserves in India

Reserve Bank of India & Centre for Industrial & Economic Research (CIER); Economic Survey 2013-14 - Table 6.1(B)

Year (as at end-March)	SDRs##		Gold*		Foreign Currency Assets*		'Reserve 'Tranche Position (RTP)		Total Reserve
	Rs. in Crore	USD Million	Rs. in Crore	USD Million	Rs. In Crore	USD Million	Rs. in Crore	USD Million	Rs. in Crore	USD Million
1950-51	-	-	118	247	911	1,914	-	-	1,029	2,161
1951-52	-	-	118	247	747	1,568	-	-	865	1,815
1952-53	-	-	118	247	763	1,603	-	-	881	1,850
1953-54	-	-	118	247	792	1,664	-	-	910	1,911
1954-55	-	-	118	247	774	1,626	-	-	892	1,873
1955-56	-	-	118	247	785	1,648	-	-	903	1,895
1956-57	-	-	118	247	563	1,184	-	-	681	1,431
1957-58	-	-	118	247	303	637	-	-	421	884
1958-59	-	-	118	247	261	548	-	-	379	795
1959-60	-	-	118	247	245	515	-	-	363	762
1960-61	-	-	118	247	186	390	-	-	304	637
1961-62	-	-	118	247	180	377	-	-	298	624
1962-63	-	-	118	247	177	372	-	-	295	619
1963-64	-	-	118	247	188	395	-	-	306	642
1964-65	-	-	134	281	116	243	-	-	250	524
1965-66	-	-	116	243	182	383	-	-	298	626
1966-67	-	-	183	243	296	395	-	-	479	638
1967-68	-	-	183	243	356	475	-	-	539	718
1968-69	-	-	183	243	394	526	-	-	577	769
1969-70	92	123	183	243	546	728	-	-	821	1,094
1970-71	112	148	183	243	438	584	-	-	733	975
1971-72	194	269	183	264	480	661	-	-	857	1,194
1972-73	226	297	183	293	479	629	-	-	888	1,219
1973-74	230	296	183	293	581	736	-	-	994	1,325
1974-75	229	293	183	304	610	782	-	-	1,022	1,379
1975-76	211	234	183	281	1,492	1,657	-	-	1,886	2,172
1976-77	192	217	188	290	2,863	3,240	-	-	3,243	3,747
1977-78	170	200	193	319	4,500	5,305	-	-	4,863	5,824
1978-79	381	470	220	377	5,220	6,421	-	-	5,821	7,268
1979-80	545	662	225	375	5,164	6,324	-	-	5,934	7,361
1980-81	497	603	226	370	4,822	5,850	-	-	5,545	6,823
1981-82	444	473	226	335	3,355	3,582	-	-	4,025	4,390
1982-83	291	291	226	324	4,265	4,281	-	-	4,782	4,896
1983-84	248	230	226	320	5,498	5,099	-	-	5,972	5,649
1984-85	181	145	246	325	6,817	5,482	-	-	7,243	5,952
1985-86	161	131	274	417	7,384	5,972	-	-	7,819	6,520
1986-87	232	179	274	471	7,645	5,924	-	-	8,151	6,574
1987-88	125	97	274	508	7,287	5,618	-	-	7,686	6,223
1988-89	161	103	274	473	6,605	4,226	-	-	7,040	4,802
1989-90	184	107	281	487	5,787	3,368	-	-	6,252	3,962
1990-91	200	102	6,828	3,496	4,388	2,236	-	-	11,416	5,834
1991-92	233	90	9,039	3,499	14,578	5,631	-	-	23,850	9,220
1992-93	55	18	10,549	3,380	20,140	6,434	-	-	30,744	9,832
1993-94	339	108	12,794	4,078	47,287	15,068	-	-	60,420	19,254
1994-95	23	7	13,752	4,370	66,005	20,809	-	-	79,780	25,186
1995-96	280	82	15,658	4,561	58,446	17,044	-	-	74,384	21,687
1996-97	7	2	14,557	4,054	80,368	22,367	-	-	94,932	26,423
1997-98	4	1	13,394	3,391	102,507	25,975	-	-	115,905	29,367
1998-99	34	8	12,559	2,960	125,412	29,522	-	-	138,005	32,490
1999-00	16	4	12,973	2,974	152,924	35,058	-	-	165,913	38,036
2000-01	11	2	12,711	2,725	184,482	39,554	-	-	197,204	42,281
2001-02	50	10	14,868	3,047	249,118	51,049	-	-	264,036	54,106
2002-03	19	4	16,785	3,534	341,476	71,890	3,190	672	361,470	76,100
2003-04	10	2	18,216	4,198	466,215	107,448	5,688	1,311	490,129	112,959
2004-05	20	5	19,686	4,500	593,121	135,571	6,289	1,438	619,116	141,514
2005-06	12	3	25,674	5,755	647,327	145,108	3,374	756	676,387	151,622
2006-07	8	2	29,573	6,784	836,597	191,924	2,044	469	868,222	199,179
2007-08	74	18	40,124	10,039	1,196,023	299,230	1,744	436	1,237,965	309,723
2008-09	6	1	48,793	9,577	1,230,066	241,426	5,000	981	1,283,865	251,985
2009-10	22,596	5,006	81,188	17,986	1,149,650	254,685	6,231	1,380	1,259,665	279,057
2010-11	20,401	4,569	102,572	22,972	1,224,883	274,330	13,158	2,947	1,361,013	304,818
2011-12	22,866	4,469	138,250	27,023	1,330,511	260,069	14,511	2,836	1,506,139	294,397
2012-13	23,538	4,328	139,737	25,692	1,412,631	259,726	12,513	2,301	1,588,418	292,047
2013-14	26,826	4,464	129,616	21,567	1,660,914	276,359	11,019	1,834	1,828,375	304,224

Purchase of foreign exchange (by India)

Why the US is keeping an eye on India’s exchange rate policies

Source: US Treasury, all figures are for past four quarters, April 23, 2018: The Times of India

The trade gap between the USA and a) China, and b) India 2007-2016
From: Source: US Treasury, all figures are for past four quarters, April 23, 2018: The Times of India

Three criteria that, in the US view, make a country a currency manipulator
From: Source: US Treasury, all figures are for past four quarters, April 23, 2018: The Times of India

Why the US is keeping an eye on India’s exchange rate policies

Washington, DC, has placed New Delhi on its currency monitoring list — a group of nations the US believes could be manipulating exchange rates to gain an edge over it in trade. A look at how countries can find themselves on the watch list

What is the US’s currency watch list, in which India was recently included?

The American government’s treasury department maintains a monitoring list of exchange rate policies of their country’s big trading partners that fall short of meeting certain criteria laid down by their Trade Facilitation and Trade Enforcement Act of 2015, which came into force in 2016. This act requires it’s treasury to submit a biannual report on the macroeconomic and currency exchange rate policies of its top trading partners to the country’s parliament. In the recent report the treasury put India in the monitoring list. Apart from India, the recent monitoring list also includes China, Japan, South Korea, Germany and Switzerland.

What are the criteria?

The 2015 act has specified three criteria that have to be fulfilled simultaneously to identify currency manipulator countries among the US’s large trading partners. Firstly, there has to be more than $20 billion bilateral trade surplus with the US (the country’s exports to the US has to be at least $20 billion more than its imports). Secondly, the current account surplus (trade surplus, net income from foreign investment and net cash transfers) has to be at least 3% of its GDP. The last criteria states that a country’s net purchases of foreign currency conducted over a 12-month period are at least 2% of its GDP. Any country that fulfils at least two of these three criteria are put in the monitoring list. In India’s case, the first and third criteria are fulfilled. Once included in the list the country will remain there for at least two consecutive reports.

What role does exchange rate play in trade gap? What if a country fulfils all three criteria?

In this context currency manipulation typically means a country is artificially keeping its currency’s exchange rate lower when compared to the American dollar. A lower exchange rate will mean its products will become cheaper while American exports to the country will become expensive, which will further increase the trade gap and harm American companies. There is no immediate consequence even if a country is declared a currency manipulator. Once a country fulfils every criteria, the US treasury is supposed to resolve the problem through oneyear negotiation. If the negotiations fail then the US government could take retaliatory steps that include sanctions and involving the IMF.

Has the US ever declared any of its trading partners a currency manipulator?

Prior to the 2015 Act, currency manipulators were identified by the conditions of Omnibus Foreign Trade and Competitiveness Act of 1988. In 1988, US designated South Korea and Taiwan currency manipulators. The declaration initiated bilateral negotiations, after which both agreed to reform their exchange rate management, let their currency appreciate and got their names removed from the list. From 1992-1994 ,China was labelled a manipulator. The US agreed to resolve its dispute through WTO in 1994 and China was removed from the list. Since 1994 no country has been declared currency manipulator.

Purchase of foreign exchange (by India)

USA found India’s $56 billion purchase in 2017 ‘unnecessary’

April 15, 2018: The Times of India

The US has added India to the currency practices and macroeconomic policies monitoring list, saying New Delhi increased its purchase of foreign exchange over the first three quarters of 2017 which does not appear necessary. India is the sixth addition to the watch list which comprises China, Japan, South Korea, Germany and Switzerland. “India increased its purchase of foreign exchange over the first three quarters of 2017. Despite a sharp drop-off in purchase in the fourth quarter, net annual purchase of foreign exchange reached $56 billion in 2017, equivalent to 2.2% of the GDP,” the US department of the treasury said. The pick-up in purchases came amidst relatively strong foreign inflows it said. “Given that Indian foreign exchange reserves are ample by common metrics, and that India maintains some controls on inbound and outbound flows of private capital, further reserve accumulation does not appear necessary,” it said.