Quote:
Originally Posted by Joshi
Forex reserves are not like pocket money which can be taken out and spent on anything needed.
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Forex reserves act as a guarantee to the lender that the borrower will not default on the loan. India has to fund a huge fiscal deficit and huge Trade Gap as well. If a country has less amount of Forex Reserves, then the Interest paid for the loan is higher.
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In short Forex Reserves is not hard cash meant to be spent at will, but is like a property, acting as a guarantee to the lender that its money is safe with you.
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That is why high Forex is needed by India, as India also takes loans from World Bank, IMF, and ADB.
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My point was u folks got alot of money like u are getting fighter jets for $10B!