Published Paper Details:

Foreign exchange reserves are the surplus of freely convertible foreign currency (generally denominated in USD, but can also be denominated in Pounds, Euros, etc.,) maintained by any country�s central bank. Foreign exchange reserves are maintained as a means to regulate the economy by controlling the level of such reserves and also acting as a source of buffer or backing of country�s funds in case of an economic crisis or currency rate fluctuation. This study aims at analysing the impact of the accumulation of foreign exchange reserves on the economy of India. The authors have utilized secondary data for the purpose of this research paper. The geographic limitation of this study is India. Some of the factors which influence the accumulation of foreign reserve holdings are the need for foreign direct investments (FDIs), liquidity andsecurity during an economic crisis.India has witnessed a huge leap in the foreign exchange reserves when compared to 1960. This has enabled India to be the fifth largest foreign reserve holding country in the world. The United States being the global economic leader is in the 20th position. This implies that the amount of foreign reserve holdings held by a country does not determine its economic stability, whereas it depends on the nation�s demands.