FX Buffers Under Strain as India's Oil Vulnerability Splits the Street
Reserves Falling Fast India's forex reserves dropped to $709.76 billion as of March 13, 2026, down $7.05 billion in a week, after peaking at $728.49 billion on February 27 — a $19 billion two-week depletion raising alarm.
RBI Intervenes Heavily RBI sold approximately $12 billion in the spot market by early March to stem rupee volatility amid the West Asia war. Interventions later tapered to allow a more controlled depreciation
Oil Shock Widening the CAD Higher oil prices inflate the current account deficit, projected at 1.5–2% of GDP, pressuring inflation and slowing growth via input costs for MSMEs
Street Divided on Resilience Import cover remains at approximately 11–12 months, above the 6–9 month comfort zone. But swap markets are now pricing in about 100 basis points of rate hikes over the next year, up sharply from before the Iran war broke out
Positives Still in Play Robust FDI of approximately $50 billion in FY26, services surplus, and remittances of around $120 billion offer some cushion. RBI's MPC statement on April 8 is expected to address the outlook for FX buffers and policy