Congress vs BJP: Who Really Built India’s Forex Wall?
India’s foreign exchange reserves recently crossed the $700 billion mark, sparking debate about which government deserves credit for building this financial shield. For students of finance and public services, this question is less about politics and more about understanding how reserves grow, what role they play, and why both governments contributed differently to the same story.
What Are Forex Reserves?
Think of forex reserves as a country’s emergency savings. Instead of being kept in rupees, they are stored in foreign currencies like dollars and euros, in gold, and in IMF special drawing rights. The Reserve Bank of India (RBI) manages them. These reserves help stabilize the rupee, cover imports, reassure investors, and act as a buffer in global crises.
Are Current Reserves Sufficient?
Yes. Economists measure sufficiency in three ways: how many months of imports reserves can cover, whether they can repay short-term foreign debt, and reserves as a share of GDP. By all standards, India is safe. With over 11 months of import cover, today’s reserves are not just sufficient but comfortably strong.
The Numbers Since 2004
In 2004–05, reserves stood at about $141.5 billion. By 2013–14, under Congress-led governments, they rose to $304.2 billion — an addition of $162.7 billion, or +115% growth. By 2023–24, under BJP-led governments, they reached $646.4 billion — an addition of $304.8 billion, or +89% growth. So, Congress saw faster percentage growth, while BJP added more in absolute dollars.
Adding FDI to the Equation
Foreign Direct Investment (FDI) inflows also matter. Between 2004–14, India received about $304 billion in FDI, with 53.6% of that effectively showing up as reserve growth. Between 2014–24, India attracted a massive $668 billion in FDI, but only 45.6% translated into reserves. The difference reflects how reserves are not just about inflows — they’re also shaped by outflows like imports and repatriation.
Where Did the Money Go?
FDI doesn’t sit in RBI’s vault. It funds factories, jobs, technology, and infrastructure. At the same time, India’s trade deficit drains dollars as we import oil and electronics. Foreign firms also repatriate profits. And RBI doesn’t hoard everything; sometimes it sells dollars to stabilize the rupee. So reserves are the net result after all these flows.
The Approach: UPA vs NDA
Congress governments (UPA) treated reserves like insurance — absorbing inflows into reserves even if it meant pressure on the rupee. BJP governments (NDA) treated reserves as firepower — ready to use them to fight volatility, especially during COVID, Fed rate hikes, and the Ukraine war. One style meant higher percentage growth; the other meant higher absolute numbers.
The Verdict
Here’s the simple comparison:
UPA (2004–14): +$163 bn, +115%, ~54% of FDI turned into reserves.
NDA (2014–24): +$305 bn, +89%, ~46% of FDI turned into reserves.
Congress grew faster, BJP added more. But neither can claim sole credit — global conditions shaped both outcomes. The lesson is not who “won,” but how India can use reserves intelligently in future shocks.
Conclusion
India’s forex reserves story isn’t about one party winning bragging rights. It’s about how different governments, in different global contexts, approached the same challenge: should reserves be treated as a savings account or as a weapon in active defense of the rupee? Congress chose to accumulate steadily, while BJP chose to deploy actively. Both added value — one through faster percentage growth, the other through larger absolute additions.
This research article has been prepared by Statscope India Research.
Darshan Walawalkar, Partner at Statscope India, notes: “The numbers tell us that reserves are not a trophy to flaunt but a shield to protect. What matters is not who added more, but whether India can use them smartly in the next global shock.”
Arun Durairajan, Partner at Statscope India, adds: “Students of finance and public policy must understand reserves in context. They are neither Congress’s medal nor BJP’s weapon alone — they are India’s safety net, built brick by brick under shifting global winds.”
