In fact, it is often held that, between 1956 and 1992, India faced balance of payments constraints in all but six years, while during the last ten years, there has never been a feeling of constraint on this account, eventhough the period coincided with liberalization of external account, global currency crisis and domestic political uncertainties.
This presentation attempts to capture the basic concepts, theory and practice with orientation on issues relevant to India. The questions addressed are; What are forex reserves? Why hold forex reserves and how did the policy evolve? What is the appropriate level of reserves? How does the current status appear in terms of indicators of adequacy of reserves?