Foreign Exchange Reserves Composition
Question
Which one of the following groups of items is included in India's foreign-exchange reserves?
Options
Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries
Foreign-currency assets, gold holdings of the RBI and SDRs
Foreign-currency assets, loans from the World Bank and SDRs
Foreign-currency assets, gold holdings of the RBI and loans from the World Bank
Explanation
India's foreign-exchange reserves comprise three main components: (1) Foreign-currency assets (primarily US dollars and other convertible currencies), (2) Gold holdings of the RBI, and (3) Special Drawing Rights (SDRs) allocated by the IMF. These are liquid assets that the RBI can use to manage the balance of payments and support the rupee. Loans from foreign countries or the World Bank are liabilities, not reserves. Option (a) incorrectly includes loans as reserves. Options (c) and (d) also incorrectly include loans. Only option (b) correctly identifies the three legitimate components of foreign-exchange reserves.
Answer: (b).
Question details
Year
2014
Paper
GS Paper 1
Question
Q83
Subject
Economy
Sub-topic
International Economics and RBI
Type
Factual single
Difficulty
Medium
Nature
Static
Source hint
RBI - Foreign Exchange Reserves
See all questions on International Economics and RBI
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