India's foreign exchange reserves touched USD 297.3 billion in December, 2010 from USD 279.1 billion in March. "It needs to be acknowledged that foreign exchange reserves have helped insulate India from the worst impact of the crisis," it said.
Unlike many Western nations, India was relatively less affected by the global financial meltdown in 2008-09 that had pushed many advanced economies into recession. India had the fourth largest foreign exchange reserves at USD 297.3 billion at the end of December 2010, it said.
At the same time, the foreign exchange reserves of Japan and Russia stood at USD 1.12 trillion and USD 479.4 billion, respectively. Neighbouring China's foreign exchange reserves was at USD 2.45 trillion in June, 2010.
According to the Survey, the country's reserves mainly comprise portfolio investment (FII), "which are more vulnerable to sudden stops and reversals and borrowings from abroad".
India's foreign exchange reserves have increased over the years from just USD 5.8 billion in March, 1991. "The reserves reached a peak at USD 314.6 billion at May-end, 2008 before declining to USD 252 billion at the end of March 2009.
"The decline in reserves in 2008-09 was inter alia a fallout of the global crisis and strengthening of US dollar vis-a-vis other international currencies," the Survey said.
About the idea of having a multilateral option of a pre-arranged credit line, the Survey noted such an option is necessary but is not sufficient. "... (This is because) foreign investors often view the size of foreign exchange reserves as a key input in taking investment decisions," it added.(via ET)