Vikrant Shekhawat : Nov 02, 2024, 09:47 AM
India-Pakistan Relations: India is one of the fastest growing economies globally today and has become the fifth largest economy in the world. In contrast, India's neighboring country Pakistan has a weak economic condition and requires constant assistance from the International Monetary Fund (IMF) to handle its economy. But recently a unique situation has emerged, where India's foreign exchange reserves (forex reserves) are facing a decline, while Pakistan's forex reserves have increased marginally.India's Forex Reserve: Recent DeclineAccording to the latest data from the Reserve Bank of India (RBI), India's foreign exchange reserves fell by $ 3.46 billion to $ 684.80 billion in the week ended October 25. India's forex reserves had reached their highest level of $ 704.88 billion in late September, but the recent decline has reduced it.India's forex reserves consist of several elements:Different foreign currencies (calculated in dollars),Gold reserves, which currently total $68.52 billion,Special Drawing Rights (SDRs) from the IMF, which currently total $18.21 billion,India's reserve position with the IMF, which totals $4.30 billion.Although India has a huge foreign exchange reserve which is essential for the country's import requirements and maintaining economic stability, its recent decline is worrisome. According to experts, India has suffered this decline in its forex reserves due to the strength of the dollar in the global market and rising crude oil prices.Pakistan: Marginal increase in small forex reservesPakistan's forex reserves, on the other hand, are much smaller than India's. According to the State Bank of Pakistan, Pakistan's foreign exchange reserves stood at $16.04 billion in the week ended October 25. This was a marginal increase compared to the previous week, as it was $16.01 billion in the week ended October 18.Although this increase in Pakistan's forex reserves is quite small, it is encouraging for Pakistan as its economy has been facing debt and economic instability for a long time. This marginal increase is also important for Pakistan as it has to meet its economic needs by taking loans from countries like IMF, China and Saudi Arabia.Comparative analysis of India-Pakistan forex positionThe forex reserves of India and Pakistan cannot be compared directly as the level of economy and foreign exchange reserves of both the countries is very different. India's foreign exchange reserves are around $684.80 billion, which is about 42 times more than Pakistan's $16.04 billion.The Indian economy is a center of attraction for global investors, and its foreign exchange reserves provide it stability in times of crisis.The Pakistani economy is affected by rising debt burden and political instability, due to which its forex reserves remain weak.What does the fall in forex reserves mean?The recent fall in India's forex reserves is due to short-term global conditions, and experts believe it may be temporary. India's large foreign exchange reserves are helpful in increasing its economic stability and rating internationally. It ensures payment for import needs, especially crude oil. In contrast, Pakistan's reserves are not enough to meet its needs, and even a small increase in it can be a cause of relief for the country.Pakistan's celebration and challenge ahead for IndiaThis small increase may be a cause of relief for Pakistan, but it is not a sign of long-term improvement. At the same time, India needs to keep a close watch on the state of its forex reserves so that it can maintain long-term economic stability and self-sufficiency in an emergency.This state of forex reserves between India and Pakistan tells us how different economic policies and global conditions can have adverse effects on the economies of the two countries. India's challenge is to maintain the momentum and stability of its economy, while Pakistan needs to move towards long-term economic reforms while reducing its dependence on external aid such as the IMF.