What are the advantages of foreign exchange reserves?
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I heard that sometime back in early 90's, we had only very little foreign exchange reserves and we were not having sufficient forex reserves to even import crude oil. I have even heard that these reserves are to be obtained through exports, remittances, foreign fund flows, etc. Can't we buy Dollars in international markets with our Rupees and use those Dollars for purchasing our imports? What is the importance of foreign exchange reserves?