The burgeoning forex reserves of India have always been a point of contest. Divergent views are exchanged on the adequacy and deployment of the reserves. Some even opine that the ballooning reserves may pose several problems to the policymakers. This article takes a close look at the growing forex reserves over the years and how best they can be utilized.

Since the opening up of the economy way back in 1991, India has experienced a positive foreign exchange scenario. Overseas investors have found the Indian soil as fertile ground for investment purpose which coupled with the increased exports has lead to a burgeoning forex reserves. As stated, it all began in the year 1991, when the reserves made a steady march from the meager level of US$5.8 bn as at end March 1991 to a handsome figure of US$113.0 bn as on end of March 2004. This further increased to a level of US$141.5 as on end of March 2005. This figure continued to increase and rose to US$143 bn till September 2005. As per the latest figures, the total reserve position as on January 20, 2006 is US$1,39,444 mn.

The foreign exchange reserves of our country have significantly grown since the liberalization process was initiated in 1991. The reserves that stood at a miniscule figure of US$5.8 bn as on March 31, 1991 gradually increased to US$25.2 bn by March 1995. This growth continued in the latter half of the decade and touched a level of US$38.0 bn by the end of March 31, 2000. Following this, the reserves stood at US$76.1 bn as on end March 2003, US$113.0 bn as on March end 2004, US$141.5 as on end March 2005 and to US$143.1 bn by the end of September 2005.

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