Investment models

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 Foreign Exchange Reserves or Forex Reserves 

It is total collection of Foreign currency that an economy possessed at a particular time.

Foreign Exchange Rate 

Forms of foreign exchange assets or reserves 

Foreign exchange reserves include gold reserves, special drawings rights and reserve tranche position in the IMF.

Foreign exchange reserves facilitate the economy the capacity to purchase or import goods and services.

Factors  affecting foreign reserves 

  • Foreign direct investment and Foreign portfolio investment :  Foreign  investment is directly  proportional to the foreign exchange reserves. When foreign countries or individuals invest in stakes of companies of an economy it is increased. Such as installation of factories and investment in existing institutions etc.. 
  • Import bills : when a country purchase goods and services from different countries then in exchange paid money causing loss of exchange reserves. Import bills is inversely proportional to the economy's foreign exchange reserves . It means on increased of import,  assets reserves of the economy decreased. 
  • Export gains :  if export rises of an economy it gains foreign assets. Export is directly proportional to foreign exchange reserves of a country.
  • Remittance inflow and out flow
    • When a country’s men residing in foreign send money or remittances to  her mother country Forex Reserves increases.
    • While money send to foreign by people to her origin country as remittances that economy losses is foreign exchange reserves. 
  • Foreign travel 
    • An economy loss its foreign exchange reserves when its country men travel to foreign 
    • An economy gains Forex assets when foreign country men visit or comes to the economy 
    • Travellers may be common people,  corporate body, government, tourist etc.
  • Value of currency: when Indian rupees Value depreciates in comparison to US Dollar assets decreased 
  • Crude oil prices: when crude oil prices in the international market increases the economy loses its Forex Reserves for the same amount of oil purchase because of higher price paid while its foreign exchange reserves increases when prices of oils in the international markets decrease that relates it in given way means foreign exchange reserves is inversely proportional to the oil prices in the international markets.




According to world investment report of UNCTAD foreign direct investment  inflow in India rose by 25.4% to reach $64  billion in 2020 from $51billion in 2019, becoming 5th largest recipient in the world in 2020, up from 8th position it held in the previous year.

India's strong fundamental and market size  will continue to attract market seeking greenfield investment. 


India's foreign exchange reserves as on June 25 2021 stood at $608.99 billion and is comfortable in terms of import cover of more  than 18 months and provides cushion against unforeseen external shock. 

Note.global economic prospects report June 2021 of world Bank.

Strategic Disinvestment 

  • Foreign exchange Management  amendment rules 2021 allows 100%  foreign investment though automatic route in Public sector Undertaking ( PSU) involved in petroleum refining those were approved for strategic disinvestment from central government. Earlier, foreign exchange management rules 2019 had allowed only 49% investment though automatic route in petroleum sector. 
What is automatic route of investment?

Under the automatic route of investment, an investor( a person) resident out side India doesn't require prior approval, for investment in India, from the RBI or Central Government.



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