(a): the amount of the minimum foreign exchange reserve and the manner
in which it is maintained;
(b) whether this reserve had fallen below the minimum limit
in the country; and
(c) the impact of the minimum foreign exchange reserve on the
economy of the country when it falls below the minimum limit?
MINISTER OF STATE IN THE MINISTRY OF FINANCE ( SHRI BALASAHEB VIKHE PATIL )
(a) & (b): Minimum level of foreign exchange reserves of a
country is normally judged by the cover that they provide to
imports. As per international standards, the level of foreign
exchange reserves at any point of time is considered adequate,
if they provide cover for at least 3 months of imports. The level
of India`s foreign exchange reserves (including gold and SDRs)
at US $44.59 billion as on August 17, 2001 provide cover for
about 8.2 months of estimated imports in 2001-02, and it is
considered comfortable, keeping in view India`s need for
essential imports, short-term liabilities, including debt
service obligations, and other unforeseen contingencies.
(c): When foreign exchange reserves of a country fall below
the minimum level, unless the country is in a position to meet
its short term requirements for foreign exchange from normal
sources of foreign exchange inflows, it becomes difficult to
pay for essential imports and to fulfil short-term obligations.
The situation may trigger speculation and panic among market
participants leading to payments crisis, and pressure on
exchange rate.