India's foreign exchange reserves climbed $938 million to $682.321 billion in the week ended 28 May, snapping the decline logged in the prior reporting period, according to data released by the Reserve Bank of India (RBI) on Friday, 5 June. The rebound follows a sharp $7.511 billion drop to $681.384 billion in the preceding week.

Where the Reserves Stand

Despite the recovery, India's stockpile remains well below its record high of $728.494 billion, reached in the week ended 27 February. The reserves have faced sustained pressure in recent months as the RBI intervened in currency markets — selling dollars to defend the rupee — following the outbreak of conflict in the Middle East. India's reserves nonetheless remain among the highest globally.

Breakdown of Reserve Components

Foreign currency assets (FCAs), which form the largest component of the reserve pool, rose by $3.116 billion to $546.148 billion during the reporting week. FCAs, denominated in dollar terms, capture the effect of exchange-rate movements in major non-US currencies — including the euro, pound sterling, and Japanese yen — held within the reserves.

Partially offsetting that gain, the value of India's gold reserves fell by $2.186 billion to $112.6 billion. The country's Special Drawing Rights (SDR) holdings with the International Monetary Fund (IMF) were unchanged at $18.747 billion.

Government's Forex Conservation Appeal

The reserve pressures have drawn a direct response from the top. Prime Minister Narendra Modi, since 11 May, has appealed to citizens to help conserve foreign exchange by curtailing overseas travel, limiting fuel consumption, and refraining from gold purchases for a year. The appeal reflects the government's intent to reduce outward forex pressure through demand-side measures alongside RBI's supply-side interventions.

RBI Upbeat on FDI Inflows

Speaking at the post-monetary policy press conference, RBI Deputy Governor Poonam Gupta projected that gross foreign direct investment (FDI) inflows would exceed $100 billion in the current financial year 2026-27. She noted that gross FDI had already reached $95 billion in FY26, backed by healthy private capital formation and a rising investment-to-GDP ratio.

Gupta indicated inflows could potentially climb to $110 billion or even $120 billion in FY27, characterising the trajectory as a structural long-term trend rather than a single-year surge. 'Private capital formation numbers actually have been very healthy. Investment-to-GDP ratio has been turning upwards,' she said, adding that India is likely to attract stronger FDI despite prevailing global economic uncertainties.

With reserves stabilising and FDI projections trending upward, the near-term trajectory of India's external balance sheet will hinge on global commodity prices, currency volatility, and the pace of RBI's market interventions.