India Economy Thread
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hydrabadi_arab
SpeedLimited
And tariff are not even in full affect. Like I said many times before India will need IMF program by 2030 if it doesn't reach trade deal with USA.
India FX reserves are borrowed from USA $230bn annual deficit. India GDP growth is borrowed from USA.
Why India's forex reserves are rising even as rupee weakens
Sep 28, 2025Amidst India’s foreign exchange reserves swelling to a record $703 billion in mid-September, the rupee has been hitting newer lows, down to 88.75-88.8 against the US dollar, its weakest level ever. On September 25, the rupee was 88.75 to a dollar.
For citizens, this would seem counterintuitive—shouldn’t massive forex reserves strengthen the currency instead of watching it slip? But the relationship between reserves and the rupee is not a straight line. To understand this, one must look at the layers of global volatility, domestic vulnerabilities and the policy choices of the Reserve Bank of India (RBI).
The first factor explaining the rise in reserves is valuation. India’s forex reserves are not parked entirely in US dollars. They comprise a basket of foreign currencies, gold, special drawing rights with the International Monetary Fund (IMF), and India’s reserve position with the IMF. With the euro, yen and pound having weakened sharply against the dollar, the dollar value of those holdings has risen.
More crucially, gold prices have rallied to multi-year highs, partly on account of safe-haven demand in a jittery global economy. Since gold forms a significant chunk of India’s reserves, its price rally has added billions of dollars to the headline number without fresh inflows.
In the week ended September 12, 2025, forex reserves climbed by $4.7 billion to $702.97 billion, of which about $2.1 billion came purely from revaluation gains in gold. By late September, gold accounted for nearly 12.5 per cent of the total reserves, with the RBI’s holdings of around 880 tonnes valued at close to $90 billion.
This valuation effect alone has helped push reserves to record highs even as the rupee continues to weaken.The second driver is capital inflows. Despite geopolitical tensions and periodic risk-off phases, India continues to be a magnet for foreign direct investment (FDI), particularly in digital infrastructure, renewables and manufacturing under the Production Linked Incentive (PLI) schemes.
Remittances, now close to $120 billion annually, remain a steady source of dollar supply. Expectations of India’s inclusion in major global bond indices have also attracted portfolio inflows into the debt market even as equity markets have seen turbulence. Together, these factors have added heft to the reserves. The RBI has also been opportunistic, mopping up inflows to build its war chest further, in line with the strategy adopted during former RBI governor Shaktikanta Das’s time that a strong reserve cover is essential to insulate India from sudden stops and external shocks.
Yet, even as reserves are breaking records, the rupee has been slipping. The primary explanation lies in the strength of the US dollar. Over the past year, the dollar index has surged as global investors sought the relative safety of US assets amidst geopolitical flashpoints, slowing Chinese growth, and Europe’s energy uncertainties. Even after the US Federal Reserve’s recent rate cut, American yields remain attractive compared to emerging markets. This has triggered capital flows into dollar assets, making the greenback stronger across the board. Virtually every emerging market currency has been under pressure, and the rupee is no exception.
India-specific pressures have reinforced the rupee’s slide. In Q1 FY 26 (April–June), the current account swung into a deficit of $2.4 billion (0.2 per cent of the GDP), reversing a surplus in the previous quarter. Analysts expect it to widen to about 1 per cent of the GDP in Q2 as imports rise.
Crude oil remains the biggest drain: although Brent has eased from earlier highs and is now hovering in the $65-69 per barrel range, volatility keeps importers on the edge since even a modest uptick adds billions to the bill. Electronics and gold imports have also surged, intensifying demand for dollars. Meanwhile, foreign portfolio investors have turned net sellers in equities, with September alone seeing outflows of about $1.3 billion, partly triggered by the US visa fee hike for Indian tech workers and concerns over IT sector earnings. These factors together have kept steady downward pressure on the rupee.
when the central bank burnt through reserves to defend a psychological level, today’s RBI has chosen to intervene selectively. Officials are clear that reserves are to prevent disorderly volatility not to maintain a fixed exchange rate. A gradual depreciation is being tolerated, even welcomed, since it helps India’s exports stay competitive and discourages excessive imports.
Indeed, were the RBI to defend the rupee aggressively at 86 or 87 to the dollar, the reserves would have fallen sharply, spooking markets about sustainability. Instead, by allowing a slow slide, the RBI is conserving its firepower while signalling that it remains ready to step in if volatility spikes.
This balancing act is not without risks. A weaker rupee raises the cost of imported items, from crude oil to edible oils to electronics, feeding into inflation. It also increases the rupee cost of servicing India’s external debt, though that remains relatively modest by emerging market standards. Politically, a falling rupee can become a touchstone for criticism, especially in the run-up to the oncoming election season. The government will not want the currency slide to be seen as a symbol of economic weakness.
India thus faces a classic policy dilemma. Intervening too heavily in the forex market would deplete reserves and could attract speculative attacks if investors sense desperation. Standing back completely could allow a sharp depreciation, importing inflation and undermining confidence. The RBI’s strategy, therefore, is to walk a narrow path: smoothing volatility, building reserves when inflows permit, and leaning against the wind only when the fall risks becoming disorderly.
What factors must India watch most closely in the months ahead? First, the trajectory of global crude oil prices. Should they breach $100 a barrel, the import bill could balloon, widening the current account deficit and straining the rupee further.
Second, the direction of US monetary policy. A faster-than-expected tightening could renew safe-haven flows into the dollar, pressuring emerging markets. Third, corporate external borrowings. With Indian firms having borrowed significantly in overseas markets, a weaker rupee raises their repayment burdens, raising systemic risks. Fourth, the net usable reserves after accounting for the RBI’s forward commitments. Gross reserves of $703 billion may appear ample, but if a chunk is tied up in forwards, the true buffer is lower.
So, what can the RBI do to stabilise the fall? Beyond selective spot market interventions, it has multiple tools. It can use forward and swap markets to manage liquidity and expectations. It can nudge exporters to repatriate earnings more swiftly, boosting dollar supply. It can open up domestic bond markets further to long-term global investors, providing stable inflows. And it can coordinate closely with the government, ensuring that fiscal deficits do not exacerbate external imbalances. Communication is equally vital: by convincing markets that it has both the means and the will to prevent a disorderly slide, the RBI can reduce speculative attacks.
Still, challenges loom. The dominance of the dollar in global trade and finance is unlikely to recede soon, meaning emerging market currencies will remain vulnerable. Geopolitical shocks, from West Asia to East Asia, could trigger sudden capital flight. Domestically, a spike in inflation due to the rupee’s weakness could limit the RBI’s monetary flexibility. And in a politically charged environment, managing perceptions may prove as important as managing fundamentals.
Many experts believe India’s record reserves are a source of comfort, but they are not a magic shield. They represent insurance against crises, not a guarantee of a stronger currency. The rupee’s value will continue to be shaped by global tides, domestic demand-supply dynamics, and the RBI’s calibration of its interventions. What matters is not preventing depreciation altogether but ensuring that it is gradual, orderly and does not spiral into panic.
For now, the paradox of rising reserves and a weakening rupee is not a contradiction but a reflection of the realities of an open economy navigating uncertain global waters. India’s challenge will be to use its ample reserves judiciously, balance competitiveness with stability and keep the faith of markets and citizens alike.
Published By:
Mansi
Why India’s forex reserves are rising even as rupee weakens
To understand what seems counterintuitive, one must look at the layers of global volatility, domestic vulnerabilities and the policy choices of the RBI
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List of countries by foreign exchange reserves - Wikipedia
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India has the world's fourth largest reserves.
In April 2024, Foreign-exchange reserves of India hit a fresh all-time high of $642.63 including 803.58 tons of gold reserves.
List of countries by foreign exchange reserves - Wikipedia
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Justin TruDont
Registered Member
If RBI was comfortable with a 600 billion Forex reserve, then Rupee would have remained below 82 to 1 USD
India should bring down its USD holdings to less than 100 Billion and Increase the Gold reserves to 2000 tons
India should bring down its USD holdings to less than 100 Billion and Increase the Gold reserves to 2000 tons
MNZGamerX
Registered Member
By Yu Xi and Wang Wenwen
Published: Oct 03, 2025 07:39 AM
Direct air services connecting designated points in China and India will be resumed by late October 2025, in keeping with the winter season schedule, subject to the commercial decisions of the designated carriers from the two countries and fulfilment of all operational criteria, according to a press release posted on the website of India's Ministry of External Affairs on Thursday.
Since earlier this year, as part of the Indian government's approach toward gradual normalization of relations between India and China, the civil aviation authorities of the two countries have been engaged in technical-level discussions on resuming direct air services between the two countries and on a revised Air Services Agreement, according to the release.
This agreement of the civil aviation authorities will further facilitate people-to-people contact between India and China, contributing toward the gradual normalization of bilateral exchanges, said the press release.
There have been no direct flights between China and India since 2020.
When Chinese Foreign Minister Wang Yi, also a member of the Political Bureau of the Communist Party of China Central Committee, held talks with Indian Minister of Foreign Affairs Subrahmanyam Jaishankar in New Delhi on August 18, they agreed to resume direct flights between China and India as soon as possible, revise the bilateral civil aviation transport agreement and provide visa facilitation.
On August 14, in response to media inquiries regarding reports that India and China are set to resume direct flight connections as soon as next month, Chinese Foreign Ministry Spokesperson Lin Jian stated, "We noted relevant reports. The total population of China and India combined is over 2.8 billion. Resuming direct flights between the Chinese mainland and India helps facilitate cross-border travel, exchanges and cooperation. For some time, the Chinese side has been in close communication with India to promote the early resumption of direct flights between the two countries."
Himadrish Suwan, chairman of the Confederation of Young Leaders of India, views the resumption of direct flights as an encouraging sign in the gradual normalization of bilateral ties.
"It marks a welcome and pragmatic step toward enhancing connectivity and deepening mutual understanding between our two nations. It will not only strengthen people-to-people exchanges, but also open new avenues for cooperation in trade, education, tourism and youth-led engagement. At a time when the global community faces unprecedented challenges, building bridges of trust and connectivity between India and China will contribute to regional stability and shared prosperity," Suwan told the Global Times on Thursday.
Long Xingchun, a professor from the School of International Relations at Sichuan International Studies University, also views the resumption of direct flights as a vital criterion to test whether China-India relations normalize, as China-India relations have notably warmed up recently.
Long believes that the move serves the interests of Indian people more.
"There have been more Indians studying, doing business or traveling in China than Chinese in India. Hopefully, on the basis of resuming direct air services, India can step further to simplify the visa process for Chinese citizens," Long told the Global Times on Thursday.
According to India Today on Thursday, Airline IndiGo announced that it will resume the direct flights from October 26. The announcement came shortly after India's Ministry of External Affairs announced that the two countries have reached an agreement on the matter, according to the report.
Published: Oct 03, 2025 07:39 AM
Direct air services connecting designated points in China and India will be resumed by late October 2025, in keeping with the winter season schedule, subject to the commercial decisions of the designated carriers from the two countries and fulfilment of all operational criteria, according to a press release posted on the website of India's Ministry of External Affairs on Thursday.
Since earlier this year, as part of the Indian government's approach toward gradual normalization of relations between India and China, the civil aviation authorities of the two countries have been engaged in technical-level discussions on resuming direct air services between the two countries and on a revised Air Services Agreement, according to the release.
This agreement of the civil aviation authorities will further facilitate people-to-people contact between India and China, contributing toward the gradual normalization of bilateral exchanges, said the press release.
There have been no direct flights between China and India since 2020.
When Chinese Foreign Minister Wang Yi, also a member of the Political Bureau of the Communist Party of China Central Committee, held talks with Indian Minister of Foreign Affairs Subrahmanyam Jaishankar in New Delhi on August 18, they agreed to resume direct flights between China and India as soon as possible, revise the bilateral civil aviation transport agreement and provide visa facilitation.
On August 14, in response to media inquiries regarding reports that India and China are set to resume direct flight connections as soon as next month, Chinese Foreign Ministry Spokesperson Lin Jian stated, "We noted relevant reports. The total population of China and India combined is over 2.8 billion. Resuming direct flights between the Chinese mainland and India helps facilitate cross-border travel, exchanges and cooperation. For some time, the Chinese side has been in close communication with India to promote the early resumption of direct flights between the two countries."
Himadrish Suwan, chairman of the Confederation of Young Leaders of India, views the resumption of direct flights as an encouraging sign in the gradual normalization of bilateral ties.
"It marks a welcome and pragmatic step toward enhancing connectivity and deepening mutual understanding between our two nations. It will not only strengthen people-to-people exchanges, but also open new avenues for cooperation in trade, education, tourism and youth-led engagement. At a time when the global community faces unprecedented challenges, building bridges of trust and connectivity between India and China will contribute to regional stability and shared prosperity," Suwan told the Global Times on Thursday.
Long Xingchun, a professor from the School of International Relations at Sichuan International Studies University, also views the resumption of direct flights as a vital criterion to test whether China-India relations normalize, as China-India relations have notably warmed up recently.
Long believes that the move serves the interests of Indian people more.
"There have been more Indians studying, doing business or traveling in China than Chinese in India. Hopefully, on the basis of resuming direct air services, India can step further to simplify the visa process for Chinese citizens," Long told the Global Times on Thursday.
According to India Today on Thursday, Airline IndiGo announced that it will resume the direct flights from October 26. The announcement came shortly after India's Ministry of External Affairs announced that the two countries have reached an agreement on the matter, according to the report.
Raj-Hindustani
Elite Member
To be sure, the production and exports numbers are based on freight on board (FOB) value at which the device leaves the factory. The market value or the retail prices are 50-60% higher.
The government pays incentives on FOB value as part of the PLI scheme.
Production of iPhones in India has increased from $2 billion in FY22 to $22 billion in FY25.
The number is set to rise this fiscal year through March 2026, although likely US tariff and other restrictions could impact exports.
“At the current run rate, Apple is expected to cross the production and export figures of last year. However, it will also depend upon the international trade negotiations and the much-anticipated semiconductor tariffs under the 232 investigations by the US department of commerce,” an industry expert said, asking not to be named.
The US’ current 50% tariffs on imports from India exclude smartphones along with computers and electronics.
The US remains the largest export market for smartphones, including for Apple.
As per industry body India Cellular and Electronics Association (ICEA), smartphone exports to the US in the April-August period reached $8.43 billion, compared to $2.88 billion in the same period last year.
Apple is the main contributor for smartphone exports to the US, followed by Samsung and Motorola.
Amid geopolitical challenges, India has now become a key part in Apple’s supply chain with burgeoning production and exports. All the iPhone models are now made in India from the start and exported across the world.
Apple’s rapid scaling of production in India has been backed by a sharp expansion of its supply chain in the country to nearly 45 companies, which include local component makers and those who make up the sub-assembly ecosystem.
These component suppliers have so far created a total of about 350,000 jobs, including 120,000 direct jobs. The jobs created by the component suppliers are in addition to the hundreds of thousands of jobs generated by the five iPhone factories.
m.economictimes.com
The government pays incentives on FOB value as part of the PLI scheme.
Production of iPhones in India has increased from $2 billion in FY22 to $22 billion in FY25.
The number is set to rise this fiscal year through March 2026, although likely US tariff and other restrictions could impact exports.
“At the current run rate, Apple is expected to cross the production and export figures of last year. However, it will also depend upon the international trade negotiations and the much-anticipated semiconductor tariffs under the 232 investigations by the US department of commerce,” an industry expert said, asking not to be named.
The US’ current 50% tariffs on imports from India exclude smartphones along with computers and electronics.
The US remains the largest export market for smartphones, including for Apple.
As per industry body India Cellular and Electronics Association (ICEA), smartphone exports to the US in the April-August period reached $8.43 billion, compared to $2.88 billion in the same period last year.
Apple is the main contributor for smartphone exports to the US, followed by Samsung and Motorola.
Amid geopolitical challenges, India has now become a key part in Apple’s supply chain with burgeoning production and exports. All the iPhone models are now made in India from the start and exported across the world.
Apple’s rapid scaling of production in India has been backed by a sharp expansion of its supply chain in the country to nearly 45 companies, which include local component makers and those who make up the sub-assembly ecosystem.
These component suppliers have so far created a total of about 350,000 jobs, including 120,000 direct jobs. The jobs created by the component suppliers are in addition to the hundreds of thousands of jobs generated by the five iPhone factories.
The big $10 billion: India sets iPhone exports record
Apple has achieved a record $10 bn in iPhone exports from India in the first six months of this fiscal, marking a significant 75% increase. September alone saw a remarkable $1.25 billion in shipments, a 155% jump from last year.
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CallSignMaverick
Registered Member
hydrabadi_arab
SpeedLimited
To be sure, the production and exports numbers are based on freight on board (FOB) value at which the device leaves the factory. The market value or the retail prices are 50-60% higher.
The government pays incentives on FOB value as part of the PLI scheme.
Production of iPhones in India has increased from $2 billion in FY22 to $22 billion in FY25.
The number is set to rise this fiscal year through March 2026, although likely US tariff and other restrictions could impact exports.
“At the current run rate, Apple is expected to cross the production and export figures of last year. However, it will also depend upon the international trade negotiations and the much-anticipated semiconductor tariffs under the 232 investigations by the US department of commerce,” an industry expert said, asking not to be named.
The US’ current 50% tariffs on imports from India exclude smartphones along with computers and electronics.
The US remains the largest export market for smartphones, including for Apple.
As per industry body India Cellular and Electronics Association (ICEA), smartphone exports to the US in the April-August period reached $8.43 billion, compared to $2.88 billion in the same period last year.
Apple is the main contributor for smartphone exports to the US, followed by Samsung and Motorola.
Amid geopolitical challenges, India has now become a key part in Apple’s supply chain with burgeoning production and exports. All the iPhone models are now made in India from the start and exported across the world.
Apple’s rapid scaling of production in India has been backed by a sharp expansion of its supply chain in the country to nearly 45 companies, which include local component makers and those who make up the sub-assembly ecosystem.
These component suppliers have so far created a total of about 350,000 jobs, including 120,000 direct jobs. The jobs created by the component suppliers are in addition to the hundreds of thousands of jobs generated by the five iPhone factories.
The big $10 billion: India sets iPhone exports record
Apple has achieved a record $10 bn in iPhone exports from India in the first six months of this fiscal, marking a significant 75% increase. September alone saw a remarkable $1.25 billion in shipments, a 155% jump from last year.
With 100% of iPhone components imported, what is margin here? 3%?
Raj-Hindustani
Elite Member
How come you know that 100% of phone components import?
From where you get false information?
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