India’s foreign exchange reserves have had a turbulent yet revealing journey over the last months, reflecting both the strength of the country’s external position and the pressures facing the rupee.
The period began on a positive note in early April. However, the trend reversed towards the end of April and through May.
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Reserves slipped by $4.82 billion to $698.49 billion in the week ended April 24, before dropping more sharply by $7.79 billion to $690.69 billion in the week ended May 1.
The decline deepened over subsequent weeks, with reserves falling to $688.89 billion as of May 15 and then to $681.38 billion by May 22. Much of this decline was due to the central bank’s efforts to cushion the rupee from excessive volatility.
As global uncertainties intensified and pressure on emerging-market currencies increased, the RBI actively used its forex arsenal while also deploying liquidity measures.Also Read | RBI MPC key takeaways: Here are the major announcements by Governor Sanjay Malhotra on GDP, inflation and repo rate
Despite the drawdown, Malhotra stressed that the reserve position remains comfortable by all key measures. The current stockpile is sufficient to cover nearly 11 months of imports and is equivalent to 89.1% of India’s external debt, providing a substantial buffer against external shocks.
The RBI governor also expressed confidence that India’s external sector will receive additional support from a series of policy reforms and trade initiatives currently underway.
According to him, recent measures such as allowing up to 100% foreign direct investment in the insurance sector, liberalising the external commercial borrowing framework, advancing the ethanol blending programme, promoting energy transition and easing investment restrictions for neighbouring countries are expected to strengthen the country’s balance of payments over time.
Trade agreements are also expected to play an important role.
India has signed trade pacts with the United Kingdom and New Zealand, while agreements with Oman and the European Free Trade Association (EFTA) have recently come into force. Negotiations on a trade deal with the European Union have been concluded, while discussions continue on an interim trade arrangement with the United States.
New Delhi is also pursuing trade negotiations with countries including Canada, Peru, Mexico, Bahrain, Qatar and South Korea, potentially expanding export opportunities and attracting fresh investment flows.
As of June 5, 2026, India’s forex reserves remain comfortably above $680 billion despite the recent correction.
While the fall from April’s peak levels may appear significant, the broader picture suggests a central bank willing to use its reserves strategically to preserve currency stability.
With a sizeable reserve cushion, ongoing trade integration efforts and reforms aimed at boosting foreign capital inflows, policymakers remain confident that India is well-positioned to manage global volatility and maintain external-sector resilience.
Meanwhile, the RBI kept the repo rate unchanged at 5.25% and retained its neutral policy stance.
While expressing confidence in India’s ability to weather external shocks, the central bank lowered its FY27 GDP growth forecast to 6.6% from 6.9%, citing risks from the West Asia conflict, elevated oil prices and supply-chain disruptions.