Rising forex reserves

Large inflows can increase policy challenges

India’s foreign exchange reserves would soon touch the $500-billion mark if the Reserve Bank of India (RBI) continues to accumulate foreign currency at the same pace as last year. India’s reserves have touched a new lifetime high of $462.16 billion, according to the latest data, after going up by over $60 billion in 2019. While higher reserves would increase India’s capacity to deal with external economic shocks, the continued flow of foreign money at this pace could complicate domestic policy management.

The flow of foreign funds increased significantly in 2019, owing to easier monetary conditions in advanced economies, particularly the