The Reserve Bank of India engaged in net dollar purchases totaling $7.41 billion in the foreign exchange market in February, marking the second consecutive month of such transactions. This move coincided with a 1% appreciation of the Indian rupee against the dollar, the first monthly gain in 10 months, following a trade deal between India and the US. In January, the RBI had made net purchases of $2.5 billion.
The RBI’s activities in February included purchasing $21.4 billion and selling $13.99 billion. By the end of February, the RBI’s net outstanding forward dollar sales reached $77.67 billion, up from $67.77 billion the previous month. Despite the rupee’s initial recovery, global energy market disruptions due to the Middle East conflict led to significant foreign portfolio outflows from Indian capital markets.
Following the turmoil, the rupee hit a record low of 95.21 in late March. However, central bank interventions to limit speculative trading helped stabilize the currency, which now trades around 93.50 per US dollar. Additionally, the RBI has forecasted India’s real GDP growth at 6.9% for 2026-27, citing sustained economic activity driven by private consumption and robust fixed investment.
The RBI’s projections acknowledge uncertainties stemming from the evolving global trade environment and heightened tensions in West Asia. While global economic activity has shown resilience, particularly in technology-related investments like artificial intelligence infrastructure, the outlook remains clouded by persistent geopolitical tensions. The recent escalation in the West Asia conflict, impacting global energy supply and trade, has raised concerns about long-term interest rates and global financial conditions, potentially affecting emerging markets through capital outflows.
