India’s forex reserves contract 5% since March, one of the highest among oil importing EMs

India’s forex reserves fell from $728.5 billion to $690.7 billion between February 27 and May 1 of 2026

The rupee fell 32 paisa to touch 95.6275 against the dollar on Tuesday as rising crude oil prices sent the Indian currency to its life-time low. The Indian currency has been one of the worst affected among EM currencies due to the country’s high dependence on crude oil imports. The RBI’s efforts to buttress the rupee has resulted in 5.2 per cent depletion in India’s foreign exchange reserves, which is one of the highest among net oil importing emerging economies.

businessline analysis finds that India’s forex reserves fell from $728.5 billion to $690.7 billion between February 27 and May 1 of 2026. In comparison to this, Hungary and Chile, both highly dependent on imported energy, saw their forex reserves increase by 1.3 per cent and 1 per cent, respectively. Meanwhile, countries like Peru and Taiwan registered modest losses in reserves during the same period, as their high value exports somewhat balance the rising import costs.

Forex reserves under pressure

India’s foreign exchange reserves came under sustained pressure through March as volatility in oil markets, capital outflows and currency defence operations intensified. The country’s reserves dropped steadily through the month and hit a low of $688 billion for the week ended March 27, marking one of the weakest reserve positions in recent years. The forex reserves then recorded a brief recovery in early April, climbing back above the $700 billion mark, in the week ended 10th April 2026, following RBI’s move to help the rupee.

The RBI capped banks’ onshore Net Open Position (NOP) exposure at $100 million and limited their access to Non-Deliverable Forward (NDF) contracts. These measures were aimed at checking speculation by banks and protecting the rupee. Despite the temporary recovery, forex reserves once again slipped during the final two weeks of April, ending at $690.7 billion by May 1.

₹ among the worst performing EM currency

The pressure on forex reserves was mirrored in the currency market, where the rupee emerged as one of the weakest performers alongside the Philippine peso losing 4.9 per cent and 6.2 per cent in value, respectively, against the dollar. In contrast, the Hungarian forint and Chinese renminbi posted gains against the dollar during the same period. The underperformance of the rupee highlights the scale of capital outflows and India’s vulnerability to elevated crude oil prices during periods of geopolitical stress.

Gold prices have also played a significant role in India’s reserve dynamics. Given the increasing share of gold in India’s forex reserves in recent years, the sharp decline in gold prices in March too resulted in dragging forex reserves lower.

Published on May 12, 2026