| India’s foreign exchange (forex) reserves are growing at such a rapid pace that it is a burning macro-economic issue now. Till the week ended October 28, 2005, the amount of forex reserves in India was as high as US $ 143.774 billion. With this amount, India became the fifth largest, in terms of forex reserves, among the rising market economies of the world and in the global scenario its position is sixth.
Capital inflows in terms of foreign direct investments, current account surplus, appreciation of Indian currency against the US dollar, growth of services export and expansions of tourism and seafood industry have been the major elements behind the tremendous growth of India’s forex reserves. With the increasing demand of educated Indian youths abroad, a significant portion of skilled work force in India, now migrates to foreign countries in search of better opportunities. The resulting increase in the amount of foreign exchange remittances contributes significantly to improve India’s credit rating in global context.
India being a popular destination for foreign tourists since long back, expansion of tourism industry in India in recent time has been highly beneficial towards building up its forex reserves. Net foreign earnings from tourism increased from US $ 4.3 billion in 2004 to US $ 5.1 billion till November 2005.
Foreign Direct Investment
The significant increase in foreign direct investment (FDI) over last couple of years plays a key role in the recent economic boom in India. FDI flows in the first half of the fiscal year 2005-06 surpassed the corresponding figure in the previous year by 35 percent. This has been the result of the liberalization measures taken by our government over last 15 years with an attempt to make our economy more competitive in the global context. To keep pace with the rapidly changing global economic scenario there was no other way out but to simplify and rationalize our FDI procedures, thereby opening up our economy to the potential foreign investors.
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