India's Forex Reserves Tumble Most in 2025 Amid RBI Intervention to Stem Rupee Slide

India's foreign exchange reserves fell by $9.3 billion in the week ending August 1, the steepest decline since mid-November. The decline coincides with US President Donald Trump's announcement of imposing 25% tariffs on Indian exports and additional tariffs due to India's continued imports of Russian oil. The Reserve Bank of India's intervention is seen as a major contributor to the decline, with around $6.9 billion attributed to its net sales of dollars.

India's foreign exchange reserves saw a significant decrease, dropping by $9.322 billion to $688.871 billion for the week ending August 1, according to data released by the Reserve Bank of India (RBI) [1]. This marked one of the steepest weekly declines in recent months, primarily due to a $7.319 billion fall in foreign currency assets, which make up the bulk of the reserves. Gold reserves also decreased by $1.706 billion to $83.998 billion for the week.

The decline coincides with US President Donald Trump's announcement of imposing 25% tariffs on Indian exports and additional tariffs due to India's continued imports of Russian oil. Moody's warned that these tariffs could significantly hinder India's manufacturing ambitions and investment inflows, potentially slowing GDP growth by 0.3% in FY2025-26 [2]. The escalating tariffs have added to global trade uncertainty, keeping foreign investors cautious. For the week, the rupee eased 0.1%, following a 1.2% drop last week, and has depreciated nearly 3% over the past five weeks [4].

The RBI's intervention is seen as a major contributor to the decline, with around $6.9 billion attributed to its net sales of dollars. The central bank has been intervening almost daily to manage rupee volatility, traders said. Despite these challenges, strong domestic demand and a resilient services sector are expected to help cushion the blow. Over the longer term, India's wider tariff gap compared to other Asia-Pacific economies could damage its manufacturing ambitions, especially in high-value sectors like electronics, and may even reverse recent investment gains.

The Reserve Bank of India kept interest rates unchanged and maintained a "neutral" policy stance following a surprise 50-basis-point cut in June. The latest foreign exchange reserves level is sufficient to cover 6.4 months of imports or 6.2 months of imports and government external debt payments, well above the international adequacy standard of around three months of imports [3].

References:
[1] https://timesofindia.indiatimes.com/business/india-business/forex-watch-indias-reserves-drop-9-32-bn-to-688-87-bn-this-week-led-by-decline-in-foreign-currency-assets-gold/articleshow/123191037.cms
[2] https://timesofindia.indiatimes.com/business/india-business/trade-war-donald-trumps-50-penalty-tariffs-threaten-indias-manufacturing-goals-warns-moodys-gdp-growth-could-slow-by-0-3/articleshow/123179504.cms
[3] https://tradingeconomics.com/indonesia/foreign-exchange-reserves
[4] https://www.reuters.com/world/india/rupee-logs-worst-losing-streak-6-months-us-tariff-woes-rbi-caps-damage-2025-08-08/