India's Forex Reserves Drop Again. Gold Takes the Biggest Hit.

Key Insights 
 

• India's forex reserves fell by $7.794 billion to $690.693 billion during the week ended May 1, 2026, according to RBI data released on Friday.

• In the previous reporting week, which ended April 24, overall reserves had declined by $4.82 billion to $698.487 billion.

India's foreign exchange reserves decreased by $7.79 billion to $690 billion during the week ended May 1, led largely by a fall in gold reserves. 

Gold prices fell 2% to $4,614 per ounce during the reported week, directly dragging down the value of India's gold holdings. 

Foreign currency assets decreased by $2.8 billion in the same period. 

Meanwhile, Special Drawing Rights edged up by $15 million to $18.789 billion, and India's reserve position with the IMF rose $8 million to $4.863 billion.

The reserves had expanded to an all-time high of $728.494 billion during the week ended February 27.

Before the onset of the Middle East conflict, which triggered several weeks of decline as the rupee came under pressure and the RBI had to intervene by selling dollars. 

In the short term, falling gold prices are accelerating the decline in reserve valuation without any change in physical holdings. 

Over the longer term, sustained RBI dollar sales to defend the rupee erode the buffer that protects India against external shocks. 

That buffer, now $37.8 billion below its peak, deserves careful watching.

Reserve Movements: A Six-Week Snapshot

The table below tracks weekly changes in India's forex reserves over key reporting periods, showing the pace and composition of the decline from the February peak.

Gold reserves fell by $5.02 billion during the reported week, the single largest component of this week's overall decline, driven directly by global gold prices dropping 2% to $4,614 per ounce. This is a valuation-driven loss, not a physical one, but it still reduces the usable buffer India holds. NewsDrum

What Falling Reserves Mean for Ordinary Indians

For most Indians, the direct impact of falling forex reserves is felt through the rupee. A weaker rupee raises the cost of imports, especially oil and electronics. 

Geopolitical tensions in the Middle East have been shaking the rupee and prompting the RBI to sell dollars to keep the currency stable. 

Every dollar the RBI sells reduces reserves and limits its future ability to intervene. Petrol, diesel, LPG, and imported goods can all edge higher if the rupee weakens further.

The RBI uses several tools to manage rupee stability. 

These include selling foreign currency, raising or lowering the repo rate to attract or reduce capital flows, and offering NRI deposit schemes to bring in fresh dollar inflows. 

These tools, used together, have so far prevented a sharp rupee slide. India's reserves, though declining, still cover around 11 months of imports, offering a meaningful cushion.

Analysts Say the Drop Is Manageable, Not Alarming

Most of the weekly decline came from foreign currency assets down by $2.8 billion and gold reserves down by $5 billion. 

The SDR and IMF reserve position both recorded small gains, showing the overall system is not under severe stress. 

Economists tracking India's external account say the pace of decline, not just the level, is the key variable to watch.

Going forward, two things will determine how quickly reserves stabilise. First, whether tensions in the Middle East ease and oil prices moderate. 

Second, whether the RBI's plans to attract NRI dollar deposits through improved FCNR-B schemes and other mechanisms succeed in bringing in fresh inflows. 

Both remain works in progress.

Conclusion

India's forex reserves remain substantial at $690.69 billion but are now $37.8 billion below their February peak. With gold prices volatile and geopolitical risks ongoing, rebuilding the buffer will require both careful RBI management and a calmer global environment.

FAQs

Has India spent more than $80 billion this year to save the rupee?

According to reports from September 2022, the Reserve Bank of India (RBI) deployed approximately $82.8 billion from its foreign exchange reserves to protect the rupee from sharp depreciation that year, Quartz India and related reports said.

How do you think the increase in India's forex reserves to a new all-time high will impact the country's economy?

India's foreign exchange reserves, hitting a new record high of $725 billion by early 2026, strengthen the economy by ensuring rupee stability, bolstering investor confidence, and lowering import costs.