Aartee Mishra is teaching live on Unacademy Plus
aily Lectuire Series Ramesh Singh' V brief summary o unacadeny 1 Indian Economy y Aartee Mishra External Sector inIndia Hindi
lam Aartee Mishra Graduated from Delhi University, Topper in all my semesters, Pursuing P.G and preparing for CSE. 2 Years of teaching experience of General Studies for competitive examination Have been teaching on Unacademy Plus
NCERT Class 6-12 Summary of All the Subjects Prelims & Mains Subjects Covered Aartee Mishr Polity: Governance, Society, Public Administration Geography: Indian and World Geography, All Important Maps, Physical and Political Features, Disaster Management History: Ancient, Medieval, Modern with Art & Culture Economics: Basic Concepts, Understanding Economic Development Science: Important Chapters of Environment and Ecology Course Starting from, 25th July 9:30pm-10:30pm on Unacademy Plus
External Sector in India All economic activities of an economy which take place in foreign currency fall in the external sector such as export, import, foreign investment, external debt, current account, capital account, balance of payment etc. FOREX RESERVES: The total foreign currencies (of different countries) an economy possesses at a point of time is its foreign currency assets/reserves' The Forex Reserves (short for 'foreign exchange reserves') of an economy is its 'foreign currency assets' added with its gold reserves, SDRs (Special Drawing Rights) and Reserve Tranche in the IMF. In a sense, the Forex reserves is the upper limit upto which an economy can manage foreign currency in normal times if need be.
Optimum Forex- the Riddle theloex resr nda's opimum level of The RBI is aware of the downside risks to the exchange rate, as is reflected by its action of buying the US dollar. Officially, the RBI targets neither a particular exchange rate nor foreign exchange reserves, and maintains such interventions by it to just reduce volatility in the forex market. But in the process of supporting weakening rupee, RBI needs to buy dollar, ultimately, leading to higher forex buid-ups. The Chief Economic Advisor ofthe Finance Ministry, however, clearly stated the kind of reserve accretion thegovernment is looking at. Citing the example of China, the Economic Survey 2014-15 said India could target foreign exchange reserves of US$750 billion to $1 trillion.
Optimum Forex- the Riddle While forex reserves act as insurance when the rupee tends to be volatile against the dollar, there are costs attached to it. When RBl purchases dollars in the spot, it leads to infusion of rupee into the system which leaves inflationary effect on the economy Since the RBl does not want such actions to create inflationary pressure, so, it converts spot purchases into forwards. This way, it is a direct cost because of the forward premiums. If RBI opts for open market operations (OMOS) to mop up excess liquidity, that also involves costs. RBI invests these dollars in instruments such as US treasuries, which offer negligible returns, owing to lower yields. But experts say these are unavoidable costs. The returns from rupee assets are much lower compared to returns from dollar assets. But RBl is not into investment management, it is there to maintain stability in the system
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