Persistence of the Middle East crisis could further dent the import cover
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May 02, 2026
QuantEco Research || INR: Reserves adequate, but comfort thinning
The RBI’s net forward position stood at USD -103 bn as of Mar-26, a record low. The effective holding of foreign currency assets (FCA adjusted for forward position) stood at USD 449 bn in Mar-26, lower than the headline figure of USD 552 bn. Notably, the effective FCA stood at a 13-month low in Mar-26, while the headline FCA dropped to a 71-month low.
- Based on the headline FCA, India’s merchandise import cover reduced to 6.7 months in Mar-26.
- This is modestly higher than the import cover of 6.0 months seen during the 2013 Taper Tantrum episode.
Persistence of the Middle East crisis could further dent the import cover. This implies greater tolerance for a weaker INR in the near term, while simultaneously mounting sequential policy measures to reduce the trade deficit/encourage capital inflows.