IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Managing India's Foreign Exchange Reserve: A preliminary exploration of issues and options

Listed author(s):
  • Chaisse, Julien
  • Chakraborty, Debashis
  • Mukherjee, Jaydeep

Since mid-nineties, India’s foreign exchange reserves (FER) – both nominal and real adjusted for price level – started growing considerably and reached a new peak of US$ 251985 million in 2008-09. The fact that such unprecedented accumulation of FER build-up has materialized despite India's balance of payment on its current account being mostly negative, has raised debates on the major potential challenges for Indian Sovereign Wealth Fund (SWF), in case they come to existence. Using the two measures of reserve adequacy - the ratio of reserves to short-term external debt and ratio of reserves to broad money – the study indicates “too much” of reserves build-up for the Indian economy particularly since 2002, suggesting thereby that India has substantial amount of surplus reserves. Given the fact that India’s current account balance is worsening for the last couple of years, it could be noted that the increase in India’s FER has been caused by speculative capital inflows on the capital account. In other words, the reserve is very much exposed to potential sudden outflows by foreign investors and any decision should be taken keeping this perspective into account.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22873.

in new window

Date of creation: 24 May 2010
Handle: RePEc:pra:mprapa:22873
Contact details of provider: Postal:
Ludwigstraße 33, D-80539 Munich, Germany

Phone: +49-(0)89-2180-2459
Fax: +49-(0)89-2180-992459
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Singh, Lakhwinder & Jain, Varinder, 2009. "Emerging pattern of India's outward foreign direct investment under influence of state policy: A macro view," MPRA Paper 13439, University Library of Munich, Germany.
  2. A. Blundell-Wignall & Yu-Wei Hu & Juan Yermo, 2008. "Sovereign Wealth and Pension Fund Issues," OECD Working Papers on Insurance and Private Pensions 14, OECD Publishing.
  3. Singh, Lakhwinder & Jain, Varinder, 2009. "Emerging Pattern of India's Outward Foreign Direct Investment Under the Influence of State Policy: A Macro View," MPRA Paper 13458, University Library of Munich, Germany.
  4. Park, Donghyun & Estrada, Gemma, 2009. "Developing Asia's Sovereign Wealth Funds and Outward Foreign Direct Investment," ADB Economics Working Paper Series 169, Asian Development Bank.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:22873. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.