Page 31 - Policy Economic Report - September 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

billion. The increase was primarily reflected in the Foreign Currency Assets (FCA), which rose to US$648.17
billion, while gold reserves stood at US$113.82 billion.

The increase in reserves strengthens India’s capacity to manage external-sector risks arising from
fluctuations in global commodity prices, capital flows and exchange-rate movements. This is particularly
relevant amid elevated geopolitical tensions and higher international energy prices, which can increase
India’s import bill and place pressure on the current account and the Indian rupee.

The record reserve level also provides greater flexibility for the RBI in managing periods of heightened
volatility in the foreign exchange market. Overall, the strengthening of foreign exchange reserves
reinforces the resilience of India’s external position and provides a substantial buffer against global
economic and financial shocks.

External Trade Developments

India’s external trade continued to expand strongly during August 2026, supported by robust growth in
both merchandise and services exports. Total exports of merchandise and services were estimated
at US$82.68 billion, registering a growth of 25.41 per cent over US$65.93 billion in August 2025. Total
imports increased to US$92.09 billion, compared with US$77.55 billion a year earlier, representing a
growth of 18.75 per cent. As a result, the overall trade deficit narrowed to US$9.41 billion during August
2026 from US$11.62 billion in August 2025. During the first five months of FY 2026–27 (April–August),
cumulative exports increased by 15.55 per cent to US$399.27 billion, while imports rose by 18.01 per
cent to US$459.65 billion.

Merchandise exports recorded particularly strong growth during August 2026, increasing to US$43.81
billion from US$34.74 billion in August 2025. Merchandise imports also increased to US$70.67 billion from
US$61.96 billion during the same period. Consequently, the merchandise trade deficit widened during the
month. On a cumulative basis, merchandise exports during April–August 2026–27 reached US$215.91
billion, compared with US$183.21 billion during the corresponding period of the previous year, while
merchandise imports increased to US$363.00 billion from US$307.09 billion. The cumulative merchandise
trade deficit consequently stood at US$147.09 billion, compared with US$123.88 billion a year earlier.

The growth in merchandise exports during August was led by Electronic Goods, Petroleum Products,
Engineering Goods, Organic & Inorganic Chemicals, and Cotton Yarn/Fabrics/Made-ups and Handloom
Products. Electronic goods exports increased by 89.82 per cent to US$5.55 billion, while petroleum
product exports rose by 63.27 per cent to US$6.81 billion. Engineering goods exports increased by 24.86
per cent to US$12.32 billion, while exports of organic and inorganic chemicals rose by 16.38 per cent to
US$2.80 billion. Exports of cotton yarn, fabrics, made-ups and handloom products increased by 13.79 per
cent to US$1.12 billion.

The services sector continued to provide an important cushion to India's external trade performance.
Estimated services exports increased to US$38.87 billion in August 2026 from US$31.19 billion in August
2025, while services imports increased from US$15.59 billion to US$21.42 billion. During April–August

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