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Q58 (IAS/2013) Economy › Money, Banking & Inflation › Exchange rate management Answer Verified

Which one of the following groups of items is included in India’s foreign-exchange reserves?

Result
Your answer: —  ·  Correct: B
Explanation

India's foreign-exchange reserves are managed by the Reserve Bank of India (RBI) and consist of four primary components: Foreign Currency Assets (FCA), gold holdings, Special Drawing Rights (SDRs), and the Reserve Tranche Position (RTP) in the International Monetary Fund (IMF) [3]. Foreign Currency Assets constitute the largest share, exceeding 90% of the total reserves, and include holdings in major global currencies like the US Dollar, Euro, and Pound Sterling [1]. Gold holdings represent the second-largest component [4]. SDRs are international reserve assets created by the IMF to supplement member countries' official reserves [2]. While the RTP is also a component, it is not listed in the correct option. Crucially, loans from foreign countries or international organizations like the World Bank are liabilities rather than reserve assets and are therefore excluded from the official forex reserve composition [2].

Sources

  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > FOREIGN EXCHANGE RESERVES > p. 483
  2. [2] https://mospi.gov.in/sites/default/files/Statistical_year_book_india_chapters/EXCHANGE%20COINAGE%20%26%20CURRENCY-WRITEUP.pdf
  3. [3] https://www.elibrary.imf.org/display/book/9781589062610/ch012.xml
  4. [4] https://www.isid.ac.in/~cghate/IPF_2024_Final.pdf
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