- The RBI reported a $30.8 billion drop in forex reserves during April-December 2025
- India faced a $22.6 billion deficit in other capital flows in 2025-26, up from $7.4 billion
- Foreign portfolio investments saw net outflows of $16.5 billion in 2025-26, mainly equities
The Reserve Bank of India (RBI) in its annual report for 2025-26 stated that the global investment environment remained challenging, and net capital flows during April-December 2025 moderated and fell short of financing the current account deficit (CAD).
This has led to dwindling of foreign exchange reserves by $30.8 billion on a balance of payments basis, excluding valuation effects, during the period. A deficit in balance of payments refers to the net gap between dollars leaving India and dollars coming in.
This deficit was $4.9 billion in 2024-25. The year before that, India had a balance of payments surplus of $63.7 billion.
In 2024-25, that deficit was $4.9 billion. The year before that, India ran a BoP surplus of $63.7 billion.
Foreign portfolio investment (FPI) flows also remained volatile during the year, with net outflows of $16.5 billion in 2025-26, driven mainly by the equity segment. In March 2026 alone, net FPI outflows stood at $13.1 billion, triggered by the outbreak of the war in the Middle East on February 28, the RBI said.
It is likely that a lot of Indians have been taking capital out of the country. The RBI report in a category called 'other capital' includes factors such as payment for imports well in advance, money kept in other countries and export receipts that are yet to be realised. A bulk of these took the deficit to $22.6 billion in 2025-26. In comparison, it was $7.4 billion the year before.
According to the RBI data, FPIs took out at least $4.3 billion more than they had added last year, which had the effect of reversing two years of net inflows.
The RBI document is a statutory report of its central board of directors that covers the working and functions of the central bank. Other matters it mentioned included observations on the Indian economy, which it said has been resilient in 2025-26 amid external headwinds. This was due to strong support by private consumption, sustained investment and sound macroeconomic fundamentals, the RBI said.
It said the outlook for the Indian economy in 2026-27 remains positive, though a prolonged Middle East conflict may pose downside risk.
The RBI said the outlook for the agriculture sector in 2026-27 remains contingent upon the progress and distribution of the southwest monsoon.
