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Increasing Inflation rate and Forex Reserve

Presented by:
Amit khanna Deepika abichandani Kirti singh Nikhil sareen

Forex Reserve???
Forex reserve or foreign exchange reserve is the currency of an overseas country that is purchased by a particular country in exchange for its own currency.
International trade and foreign investmentTwo countries

Sources of Forex Reserve


FDI FIIs TOURISM EXPORTS VALUATION GAIN BANKING CAPITAL SHORT TERM CREDIT

Effects of forex reserve on currency


Increase( ) forex reserve appreciation of rupee
Decrease( ) forex reserve depreciation of rupee

Factor for a currency to depreciate - INFLATION


Rise in general level of prices of goods and services over the period of time The prices of goods and services is rising and subsequently purchasing power is falling Role of central bank Reduction in value of money

Measures of inflation
Two main ways to measure inflation
WPI CPI

Rate of inflation
The RATE at which the price of everything goes up rate of inflation
Do not keep money stagnant Higher rate of return than on rate of inflation

Current scenario

Top 10 countries having high inflation rate


1. Zimbabwe very high inflation over 1 million% 2. Burma 40% 3. Iran 25.3% 4. Vietnam 25.2% 5. Egypt 21% 6. Pakistan 19.27%

Top 10 countries having high inflation rate


7. Latvia - 17.9% 8. Iraq 16% 9. Bulgaria 155 10. Qatar 14.75%

Foreign Exchange Reserves Variation over Item Week End-March End-December Year 2008 2007 Rs. Crore US$ Mn. Rs. Crore US$ Mn. Rs. Crore US$ Mn. Rs. Crore US$ Mn. Rs. Crore US$ Mn. 1 2 3 4 5 6 7 8 9 10 11 Total Reserves 13,33,962 311,790 8,418 691 95,997 2,067 2,48,942 36,474 4,64,021 98,304 (a) Foreign Currency Assets 12,92,470 302,050 8,420 694* 96,447 2,820 2,41,985 35,497 4,52,557 95,936 (b) Gold 39,190 9,202 934 837 6,371 874 11,043 2,291 (c) SDRs 47 11 27 8 34 8 41 10 (d) Reserve Position in the IMF** 2,255 527 2 3 511 91 552 95 380 67 * : Foreign currency assets expressed in US dollar terms include the effect of appreciation/depreciation of non-US currencies (such as For details, please refer to the Current Statistics section of the RBI Bulletin. ** : Reserve Position in the International Monetary Fund (IMF), i.e., Reserve Tranche Position (RTP) which was shown as a memo item has been included in the reserves from the week ended April 2, 2004 in keeping with the international best practice.