India's foreign exchange reserves are at a record high of $214.83 billion. Considering this rapid rise in country's forex reserves, the need to gauge adequacy of reserves has gained importance, said the RBI in its report on foreign exchange.
With the changing profile of capital flows, the traditional approach of assessing reserve adequacy in terms of import cover has been broadened to include a number of parameters, which take into account the size, composition and risk profiles of various types of capital flows as well as the types of external shocks to which the economy is vulnerable.