India's Rupee Plummets, Forex Reserves Under Pressure

India's currency is experiencing a sharp decline, reaching record lows due to significant pressure on its external balance of payments. This situation has prompted the government to implement several measures aimed at reducing dollar outflows and stabilizing the rupee.

Analysts anticipate a widening of India's balance of payments deficit, with projections suggesting it could reach $65 billion in the 2026-27 financial year, up from an estimated $35 billion in the previous year. Key factors contributing to this deficit include rising oil prices and continuous selling of Indian stocks by foreign investors.

In response, India has raised import duties on gold and silver to 15%, a substantial increase from the previous 6%. Additionally, import rules for gold and silver have been tightened. The government has capped duty-free gold imports for jewelry exports at 100 kilograms per license and placed silver bar imports under a restricted category.

To further conserve foreign exchange, Prime Minister Narendra Modi has appealed to citizens to curtail non-essential foreign travel and encouraged working from home to reduce fuel consumption and decrease oil import costs. The Reserve Bank of India has also taken steps to curb currency speculation by reducing the limit for net open forex positions that banks can hold.