International currency reserves in emerging market economies: does India have enough?

Abstract

Purpose

This paper seeks to revisit the international reserve policies of emerging market countries; taking the case of India. Emerging market economies have lately been accumulating large foreign reserves. The paper aims to demonstrate how these reserves can be put towards effective growth by implementing better reserve and debt management policies.

Design/methodology/approach

The paper uses descriptive and comparative ratio analysis methods and applies these to the case of Indian international monetary reserves. These methods provided a clear view of India's international reserves and how reserve vulnerabilities can be identified.

Findings

Based on the suggested benchmarks, the findings indicate that India may be holding reserves in excess of the suggested requirements.

Research limitations/implications

Data on international monetary reserves need continual updating. Continuous longitudinal data would help in showing the true effects of international monetary reserve fluctuations and vulnerabilities over time.

Practical implications

International finance researchers and practitioners are always seeking methods and approaches for understanding what constitutes the optimal international reserve level. The analysis and findings from this paper provide practitioners and academicians with appropriate benchmarks for the case of emerging market countries.

Originality/value

This paper extends and expands the discussion on how international monetary vulnerabilities can be identified, assessed and analyzed in emerging market countries from proposed benchmarks in this paper.

Citation

Dania, A. and Spillan, J.E. (2007), "International currency reserves in emerging market economies: does India have enough?", International Journal of Commerce and Management, Vol. 17 No. 1/2, pp. 149-165. https://doi.org/10.1108/10569210710776521