Earlier this month, India’s foreign exchange reserves exceeded US$600 billion for the first time and reached a record of US$605 billion on June 4. In fact, in many ways, this is a gratifying milestone. 30 years ago: In 1991, the Indian government was on the verge of bankruptcy. Foreign exchange reserves can hardly cover three weeks of imports.
The country had to pledge its gold reserves to seek help from the International Monetary Fund. To avoid violating your payment obligations. For the first time since 2010, we have achieved positive currency reserves after covering all external debts. Although Russia’s GDP has grown significantly, the percentage of foreign exchange reserves in GDP is the highest ever.
For the first question, it is important to compare these foreign exchange reserves with forecasted imports for 2021-22: the current level of reserves covers less than 15 months of imports, which is significantly lower than the foreign exchange reserves of some countries. More developed countries, such as China (third, 3 trillion US dollars, equivalent to 16 months of imports), Switzerland (1.4 trillion US dollar which is equivalent to 39 months of imports) and Japan (US$1 trillion, which is equivalent to 20 months of imports).
Of course, India’s better than emerging economies. In addition, an overall assessment of risks, market conditions and changes in requirements. Determining whether reserves are sufficient requires protection against unexpected external shocks. China has an unusually large share, and some lessons can be learned from it. Beijing invests in its foreign exchange reserves through two main investment vehicles: SAFE (State Monetary Administration) and CIC (China Investment Corporation).
The SAFE is controlled by the People’s Bank of China, the central bank of China. He diversified his investment to Australia, the United Kingdom, France, the United States and Germany. Investment is mainly concentrated in four sectors: finance, energy, real estate, and to lesser extent agriculture. China Investment Corporation (CIC) is the official state fund (SWF) of China. Invest in public market stocks and bonds, hedge funds, and private equity funds. He also specializes in private equity investments and major government financial institutions in China.