Page 27 - Policy & Economic Report - July 2025

POLICY AND ECONOMIC
ROEILPO&RGTAS MARKET

Figure 14: HSBC India Manufacturing PMI

Source: HSBC, S&P Global PMI

India’s external position

Foreign Exchange Reserves

India's external sector continued to exhibit resilience during July 2026 as the country's foreign exchange
reserves remained at comfortable levels despite heightened volatility in global financial markets and
persistent geopolitical uncertainties. Although reserves moderated from the record highs witnessed in
June, they continued to rank among the world's largest, underscoring the strength of India's external
position and the Reserve Bank of India's prudent reserve management strategy. The sizeable reserve
buffer continued to reinforce investor confidence, support exchange rate stability and ensure adequate
liquidity to meet the country's external financing requirements, thereby strengthening India's resilience
against global financial and commodity market shocks.

According to the Reserve Bank of India (RBI), India's foreign exchange reserves increased by US$ 1.08
billion to US$ 676.24 billion for the week ended 18 July 2026, marking the second consecutive weekly
increase. The improvement was primarily driven by a rise in Foreign Currency Assets (FCAs), reflecting
favorable valuation gains arising from the depreciation of the US dollar against other major reserve
currencies as well as changes in the RBI's foreign asset holdings. The increase in reserves came amid
continued volatility in global financial markets and demonstrated the resilience of India's external position
despite evolving geopolitical and macroeconomic challenges.

Foreign Currency Assets (FCAs), which account for nearly 85 per cent of India's total foreign exchange
reserves, increased by US$ 1.21 billion to US$ 574.76 billion during the week. Gold reserves also increased
by US$ 0.12 billion to US$ 84.68 billion, continuing the RBI's gradual diversification of reserve assets and
reflecting the increasing role of gold as a strategic safe-haven asset amid elevated global uncertainty.
Meanwhile, Special Drawing Rights (SDRs) declined marginally by US$ 0.19 billion to US$ 18.65 billion,

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