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Forex Reserve of a country represents the amount of the foreign exchange available at its disposal. It comprises of the gold reserve that is kept with the International Monetory Fund, Special drawing arrangement that is permitted with the IMF and the foreign currencies that are available in the form deposits with the various banks operating in India. This foreign exchange is used to affect the payment towards the import of goods and services from various countries. If the reserve is insufficient than the country may not be able to affect the payment and resulting in its inability to do trade with other countries.