Utilisation of foreign exchange reserves

Foreign Exchange Reserves of India has recently been raising and has reached nearly US$ 600/- billion. This is deposited by Reserve Bank of India in foreign Central Banks, used in buying foreign government bonds, for buying gold etc. The return on these investments is very low at 1-2 % per year.

India;s imports of goods and services is around US$600/- billion, Generally, it would be sufficient if the foreign exchange reserve covers 3 months imports.

India’s external debt is mostly by private sector and the foreign exchange required to service the debt is also not much.

Indian Overseas investment is also considerable.

It appears that , to start with an amount of US$100 /= billion out of US$600/ billion can be withdrawn by RBI and lent to Government for undertaking large infrastructural projects which will eliminate unemployment and enlarge GDP.

India -Budget 2021-22

Budget estimates of total expenditure during 2021-22 is Rs.3483236 crores compared to Revised estimates of total expenditure of Rs3450305 during 2020-21, The increase is only about 1%,. However compared with actual expenditure of Rs.2686330 crores in 2019-20 , the increase in 2021=22 is Rs,796906crores which is about 30% which is good. But taking into account the inflation, the expenditure estimated in 2021-22 is not enough to achieve high growth in GDP.

Usually, the growth in GDP is directly proportional to growth in govt. and private sector spending. Since the govt expenditure is low, government should permit and facilitate higher investment by private sector. Divestment is one important tool to increase private investment but then govt.investment would be reduced.

Government should encourage higher consumption of only essential items but also luxury items like air conditioners, refrigerators, vacuum cleaners, microwave ovens, etc by facilitating easy loans. Government should also permit private investment in generation and distribution of renewable energy, investment in railways, roads, transport, water storage and distribution, education, health etc

In the alternative, government could borrow money from Reserve Bank of India and spend liberally. An additional spending of Rs.20,00,000 crores will ensure very high growth in GDP. The loan can later be monetized. There will be inflation but this will be easily borne by the people with the additional working members and higher wages.