Page 28 - Policy Economic Report- June'26

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

According to the Reserve Bank of India, foreign exchange reserves increased by US$ 5.68 billion to US$
703.95 billion for the week ended 20 June 2026, reversing the decline recorded in the previous week. The
increase was primarily driven by a rise in Foreign Currency Assets (FCAs), which constitute the largest
component of India's reserves. Gold reserves also recorded an increase during the period, while Special
Drawing Rights (SDRs) and the Reserve Position in the International Monetary Fund (IMF) remained
broadly stable.

Foreign Currency Assets increased by US$ 4.85 billion to US$ 596.98 billion, reflecting valuation gains
arising from movements in major international currencies as well as changes in reserve asset holdings.
Gold reserves rose by US$ 0.74 billion to US$ 81.90 billion, continuing the RBI's gradual diversification of
reserve assets. India's Special Drawing Rights (SDRs) increased marginally to US$ 18.73 billion, while
the Reserve Position in the IMF stood at US$ 6.34 billion.

India's strong foreign exchange reserve position continues to provide an important cushion against
external vulnerabilities, particularly in the context of higher global crude oil prices, increased capital flow
volatility, and elevated geopolitical risks. The reserves remain sufficient to finance several months of
imports and strengthen India's external sector resilience by supporting exchange rate stability and
mitigating the impact of sudden external shocks. Going forward, the trajectory of foreign exchange
reserves will depend on global capital flows, trade performance, movements in the US dollar, foreign
portfolio investment, and the Reserve Bank of India's foreign exchange operations.

External Trade Developments

India's external trade sector maintained strong momentum during May 2026, despite persistent
geopolitical uncertainties, elevated crude oil prices, and a challenging global trade environment. Total
exports (merchandise and services combined) were estimated at US$ 81.96 billion, registering a growth
of 15.83 % compared with US$ 70.76 billion in May 2025. Total imports increased to US$ 92.47 billion,
reflecting a year-on-year growth of 19.23 %, primarily driven by higher energy imports and stronger
domestic demand. During the first two months of FY 2026–27 (April–May), cumulative exports increased
by 14.66 % to US$ 162.69 billion, while imports grew by 14.38 % to US$ 182.83 billion, indicating
continued resilience in India's external sector.

Merchandise exports during May 2026 increased to US$ 45.20 billion from US$ 38.30 billion in May 2025,
registering a robust growth of 18.02 %. Non-petroleum exports also remained resilient, increasing
by 11.88 % to US$ 36.78 billion, while cumulative non-petroleum exports during April–May 2026–27 rose
by 10.49 % to US$ 70.74 billion. The sustained expansion in non-petroleum exports indicates that India's
export growth continued to be broad-based and supported by manufacturing and value-added sectors
rather than being solely driven by petroleum products.

The growth in merchandise exports was led by petroleum products, engineering goods, organic and
inorganic chemicals, electronic goods, and gems & jewelry. Petroleum product exports recorded the
highest increase among the major export categories, rising by 54.89 % from US$ 5.44 billion in May 2025

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