India's External Financial Balance Strengthens in FY2025-26

India's net international investment position saw a robust improvement in the first quarter of FY2025-26, with a USD 52.4 billion reduction in non-residents' claims. A significant rise in overseas assets and declining foreign liabilities underscored the country's reinforced external financial standing, despite rising debt liabilities.

India witnessed a notable enhancement in its net international investment position in the January-March quarter of FY2025-26, according to the Reserve Bank of India (RBI). The country saw a decrease in net claims by non-residents amounting to USD 52.4 billion, bringing the total to USD 209.9 billion by the end of March 2026.

This improvement was largely attributed to a USD 40.1 billion drop in foreign-owned assets within India and a USD 12.3 billion surge in overseas financial assets held by Indian residents. The RBI indicated that currency exchange movements, especially the rupee's depreciation against major currencies, influenced the valuation of these liabilities in US dollar terms.

Reduction in foreign liabilities was primarily due to a decline in both portfolio and direct investments. Although foreign direct investment increased when measured in rupees, its dollar value dwindled because of currency depreciation. On the asset side, overseas direct investment was the largest factor in the increase of Indian assets abroad, followed closely by reserve assets.

RBI data highlighted that India's ratio of international financial assets to liabilities rose from 82 to 85.2 per cent at the quarter's end, reflecting a more robust balance sheet. Yet, the share of debt in total external liabilities increased to 56.6 per cent.

Throughout the full financial year 2025-26, non-resident claims fell by USD 119.2 billion. This decline was driven by reduced external liabilities, influenced heavily by the rupee's depreciation against the dollar, and a substantial increase in overseas financial assets. Overall, the data indicates a strengthening in India's international financial position.