Gold Reserve: To stop the falling rupee, the Reserve Bank is adopting the strategy of increasing the purchase of gold. There are preparations to meet the target of purchasing a total of 50 tonnes of gold in a year by the end of the financial year 2025. Its objective is to increase foreign exchange reserves as well as reduce the risk of changing currency prices. Apart from this, the volatility of rupee against US dollar also has to be reduced.
Therefore, the Reserve Bank has increased the purchase of gold since the month of October. With this, the gold reserve will stand as an important pillar of India’s foreign exchange reserve. Anyway, gold reserves as part of foreign exchange reserves had reached a record high at the end of September. This made it much easier to stop the falling rupee against the US dollar.
India has purchased 32.63 tonnes of gold till September
The Reserve Bank has purchased 32.63 tonnes of gold between April and September. In this way, India’s gold reserve jumped from $52.67 billion to $65.74 billion in March. A report of the Reserve Bank states that 324.01 metric tonnes of India’s gold is kept in the safe custody of the Bank of England and the Bank for International Settlements.
In 1991, 87 tonnes of gold had to be mortgaged.
How important the gold reserve is for India can be gauged from the fact that in 1991, India had to pledge 87 tonnes of gold to avoid being a defaulter and to save its credit. Only after this, India was able to get foreign exchange reserves for emergency, so that foreign currency could be paid for imports. The incident of 1991 is a lesson for India in the situation of emptying of foreign exchange reserves due to excess imports and falling rupee. For this reason, the Reserve Bank is emphasizing on increasing the gold reserve as much as possible.
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