The Reserve Bank of India has intensified its dollar sales as the rupee continues to face volatility, with net sales reaching $43.2 billion in the spot market till November 2025. This represents a significant 28% increase compared to the $34.5 billion sold during the entire FY25 period, highlighting the central bank's active intervention to stabilize the currency.

Spot Market Intervention Shows Mixed Trends

The pace of RBI's dollar sales in the spot market showed signs of moderation in November 2025, according to central bank data. Net dollar sales stood at $9.71 billion, declining from October's higher figure of $11.87 billion. Despite this month-on-month reduction, November's sales remained the second highest in FY26.

Forward Market Activity Remains Robust

While spot market sales moderated, the RBI's forward market transactions remained strong throughout the period. At the end of November 2025, the central bank had sold $66 billion in the forward market, primarily aimed at influencing future expectations on the rupee. This figure represented a nearly 4% increase compared to October 2025 levels.

Forward market transactions involve contracts where dollars are bought or sold for future delivery dates rather than immediate settlement, allowing the central bank to manage currency expectations over longer timeframes.

Policy Shift Reflects Economic Pressures

The intervention strategy marks a significant shift from previous fiscal years. In FY25, the Reserve Bank became a net seller of dollars, selling $34.5 billion in the spot market compared to net purchases of $41.2 billion in FY24. The forward market activity showed an even more dramatic change, with contract sales jumping to $84.3 billion in FY25 from just $0.5 billion in FY24.

Economic Challenges Drive Intervention

According to Abhishek Upadhyay, Senior Economist at I-Sec Primary Dealership, the intervention was necessitated by multiple economic pressures. "The intervention was forced to offset a poor balance of payments position that is likely to show a deficit for the second consecutive year, as well as to tackle weak sentiment stemming from high US tariffs that could be supporting speculative activity against the rupee," he explained.

The rupee's performance has been particularly challenging, with the currency breaching significant psychological levels of 90 and 91 in December 2025 and January 2026 respectively. These developments have prompted analysts to expect continued intervention trends as the central bank works to manage currency volatility and maintain financial stability.

The Reserve Bank of India has expressed confidence in the country's economic trajectory, projecting that India will maintain its status as the world's fastest-growing major economy despite mounting global uncertainties. The central bank's January bulletin highlighted optimistic growth prospects while acknowledging the challenges posed by escalating geopolitical tensions and trade policy uncertainties.

Economic Growth Projections

The RBI's economic researchers, guided by deputy governor Poonam Gupta, have projected India's GDP growth at 7.4% for 2025-26, representing a significant improvement from 6.5% in the previous year. This growth trajectory is expected to be driven primarily by domestic factors, with manufacturing sector rebound and continued services sector buoyancy supporting overall economic expansion.

Current Economic Indicators

High-frequency indicators for December demonstrated continued momentum in growth impulses, with demand conditions remaining robust across sectors. The economic resilience is particularly evident in the resurgence of rural demand and gradual recovery in urban consumption patterns. However, net exports have acted as a drag on growth, reflecting the impact of global trade tensions and tariff impositions.

The flow of financial resources to the commercial sector has increased substantially over the past year, with both banking and non-banking sources contributing to credit expansion. This enhanced credit availability has provided the necessary boost to economic activities across various sectors.

Global Challenges and Policy Response

The year 2026 began with significant geopolitical tensions, including US intervention in Venezuela, conflicts in the Middle East, and uncertainty surrounding the Russia-Ukraine peace negotiations. These developments have created elevated geo-economic risks and policy uncertainty globally.

Despite these challenges, RBI researchers maintained their positive outlook, stating that "the current state of the economy provides ground for optimism going forward."

Export Diversification Strategy

India has intensified efforts to diversify its export portfolio and strengthen trade relationships globally. The country is currently engaged in trade negotiations with 14 countries or groups, representing nearly 50 nations. Key negotiation partners include:

• European Union
• Gulf Cooperation Council countries
• United States
• Various bilateral partners

December marked significant progress with the conclusion of trade negotiations with New Zealand and Oman, expanding India's trade partnership network.

US Tariff Structure Impact

The United States has implemented a comprehensive tariff structure affecting Indian exports, creating substantial trade barriers:

Additionally, the US has announced an extra 25% tariff on countries continuing trade relationships with Iran, further complicating the global trade environment.

Future Policy Focus

The RBI emphasized that future policy initiatives should focus on balancing innovation with stability, ensuring consumer protection, and maintaining prudent regulatory approaches. This strategic framework is expected to improve productivity and support sustainable long-term economic growth while navigating the complex global economic landscape.