Q.3) The ascending stock of forex reserves in India has led to the view this will enable the sole devotion of monetary policy to domestic objectives. Do you agree with this view? Give reasons in support of your agreement. (10 Marks)

“Mentor’s Comments”

  • https://www.financialexpress.com/opinion/high-forex-reserves-are-no-guarantee-of-monetary-policy-independence/2288861/
  • In the intro, mention that recently India’s forex reserves touched a lifetime high of $610 billion.
  • In the body, first discuss the significance of forex reserves for a country and the purpose it serves. In the next part, give your opinion in support or against the view that such level is enough for India to tide over the various factors that affect the forex reserves as mentioned in the article.
  • Conclude by mentioning that when the economy is open, it is more prudent to let market forces play out a bit than persist with a stance that could turn unsustainable despite the high reserves.

 

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SUMITA DOWERAH
SUMITA DOWERAH
2 months ago

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