Economic Survey, 2022: India's Foreign Exchange Reserves Inflated To US$634 Billion

India's Economic Survey has been published on January 31, 2022, by the union finance minister prior to the budget. The survey report mentioned that the central bank of the country rolled up foreign exchange reserves in the recent past. According to the report, despite all the disruptions caused by the global pandemic, India's balance of payments remained in surplus throughout the last two years. Due to this, the Reserve Bank of India to keep accumulating foreign exchange reserve, which stands at US$634 billion on 31st December 2021. This figure is equivalent to 13.2 months of imports and higher than the country's external debt.

Till the end-November, last year, the country stood at the 4th largest foreign exchange reserves holder globally, after China, Japan, and Switzerland. This accumulation in reserves led to an improvement in external vulnerability indicators such as foreign exchange reserves to total external debt, short-term debt to foreign exchange reserves, etc.

Additionally, the Economic Survey, 2022 stated, "India's salient external sector sustainability indicators are strong and much improved as compared to what they were during the global financial crisis or taper episode of 2013. For instance, the import cover and foreign exchange reserves are more than double now." The combination of high foreign exchange reserves, sustained foreign direct investment, and rising export earnings are expected to provide a good buffer against any liquidity tapering/monetary policy normalization in the FY 2022-23.