Civil Services Prep

Prelims 2013 · Economy · Question 33

Which one of the following groups of items is included in India's foreign-exchange reserves?

  1. Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries
  2. Foreign-currency assets, gold holdings of the RBI and SDRs
  3. Foreign-currency assets, loans from the World Bank and SDRs
  4. Foreign-currency assets, gold holdings of the RBI, and loans from the World Bank

Answer

Foreign-currency assets, gold holdings of the RBI and SDRs

  • (a) India’s forex reserves include foreign currency assets, gold, SDRs, and reserve position in the IMF. Loans from foreign countries are not a component. Verdict: Incorrect.
  • (b) Foreign currency assets + RBI’s gold holdings + SDRs are all standard components of India’s foreign-exchange reserves. Verdict: Correct.
  • (c) Loans from the World Bank are external liabilities/borrowings, not forex reserve assets. Verdict: Incorrect.
  • (d) Gold holdings are included, but World Bank loans are not part of forex reserves. Verdict: Incorrect.

Correct answer: (b).

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