The questions addressed in this paper are: What are forex reserves? Why hold forex reserves and how did the policy evolve? What is the appropriate level of reserves? How does the current status appear in terms of indicators of adequacy of reserves? The author also focuses on several aspects of forex management such as the implications for quasi-fiscal deficit and communication policy of the RBI. The issues in regard to policy and management of forex reserves in India are posed in some detail. The concluding part contains some random thoughts from a futuristic perspective.
