India’s International Reserves: How Diversified?

Abstract

India has been stockpiling international reserves at an impressive pace during the last two decades or so. Reserves have sky-rocketed from around USD 5–6 million in 1991 to nearly USD 300 billion in mid-2008, among the highest in the world after China and Japan. India’s reserves took a dip in mid-2008, following the reversal of capital flows induced by the global financial crisis as the RBI attempted a partial defense of the Indian Rupee to moderate the pace of its depreciation. However, as the crisis abated and the country saw the Congress-led government return to power in May 2009, foreign capital has begun surging back to India once again, helping the country to rapidly rebuild its foreign exchange reserves (Figure 19.1).