FOREIGN EXCHANGE RESERVES IN INDIA- A POLICY PERIOD ANALYSIS

Motivation/Background: Foreign exchange reserves (forex reserves) received large-scale interest among the developing economies because of rapid increase in globalization, the acceleration of capital flows and the integration of capital markets domestically and globally as well. The expansion in the volume of trade activities and capital inflows in the form of investments and external commercial borrowings (ECBs) has led to the emergence of importance of managing the foreign exchange reserves. Foreign exchange reserves (FER) are regulated and managed by the various countries' central banks. Method: The study is divided into four policy periods, namely, Liberalization, Globalization, World Recovery and Global financial crises. It will be using semi log growth equation model with dummy variables to find out the growth rates in foreign exchange reserves for different policy periods. Trends in foreign exchange reserves have been analysed for the period 1991-2017. Results: The finding of the study presents that the level of foreign exchange reserves are statistically significant in all the policy periods except world recovery, and the growth rates are also significant in all the policy periods. Conclusion: The current paper can be of great use for the policy makers as it will help them to analyse the trends in foreign exchange reserves in India not only during various policy periods but also in predicting the future trends of the foreign exchange reserves.